master thesis role of competitive intelligence in ...the same time. in more detail, results...
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MASTER THESIS
Role of competitive intelligence in strategic purchasing
decisions and its influence on suppliers’ resource
allocation
Handed in to: University of Twente – First supervisor Niels Pulles Chair of Technology Management – Innovation of Operations University of Twente – Second supervisor Jasper Veldman Chair of Technology Management – Innovation of Operations Technical University of Berlin – First supervisor Tim Franke Chair of Strategic Leadership and Global Management
Created by: Carolina Schiefer In den Seelen 9 72622 Nürtingen Germany +49 172 2606884 [email protected]
Innovation Management and Entrepreneurship Student number: s1359347 (University of Twente), 337484 (TU Berlin)
Nürtingen, October 19, 2013
ROLE OF COMPETITIVE INTELLIGENCE IN STRATEGIC PURCHASING DECISIONS AND ITS INFLUENCE ON SUPPLIERS’ RESOURCE ALLOCATION Abstract
Competition on the factor market undoubtedly has extensive consequence for a company’s profitability and overall market strength. It is therefore most likely that a focal company will try to obtain competitive advantage within purchasing activities. Hence, having an effective and efficient supplier base and the allocation of external resources have received great attention among scholars. Companies strive for the so-called preferred customer status with their respective suppliers. This status grants favorable treatment in terms of suppliers’ resource allocation over other competitors. In order to achieve this preferential treatment, competitor intelligence, referring to information about the focal company’s position in relation to that of others and its individual relationships to its suppliers, in strategic purchasing decisions is essential and part of the companies’ agenda.
This paper aims at analyzing how competitor intelligence in strategic purchasing decisions affects the suppliers’ resource allocation and leads to a competitive advantage. Based on an exploratory multiple-case study with ten Global Players, insights into strategic purchasing decisions and the consideration of competitor intelligence were gathered. Thus, this paper sets the first step towards theory building with respect to the use and effect of competitor intelligence in strategic purchasing. It was found that competitor intelligence is imperative for strategic purchasing decisions and positively affects the decision’s outcome. Surprisingly, most of the companies perceive competitors sharing the same supplier to be a threat and an opportunity at the same time. In more detail, results indicate, that while competitor intelligence may slightly affect the buyer-supplier relationship per se; the assumption that competitor information leads to a better resource allocation and ultimately positively affects a company’s competitive advantage is widely accepted by the participants.
Keywords
Resource allocation – buyer-supplier relationship – preferred customer status – strategic purchasing – decision making – competitor intelligence 1. Introduction
Today, supply chains are considered a valuable mean of securing sustainable competitive advantage and improving organizational performance. There is a shift from focusing on competition between companies to competition among supply chains. This shift results from the fact that externally acquired resources lead to strong dependencies from a buying company to its supply chain environment (Baxter, 2012, p. 1250; Pfeffer & Salancik, 1978). Therefore, especially indirect competitors with high resource similarity but low market commonality pose the greatest threat to a buying company (Bergen & Peteraf, 2002; Chen, 1996). In this context, current literature developed the theory of the preferred customer status (PCS) which helps a company to derive greater benefits from the suppliers’ resources than direct and indirect competitors sharing the same supplier (Dyer & Hatch, 2006; Schiele et al., 2011; Schiele et al., 2012a; Steinle & Schiele, 2008). Seeking for or maintaining this preferred position granted by key suppliers is considered a strategic purchasing decision and necessitates a complete picture of all aspects of dominance or inferiority compared to buyers sharing the same supplier (Day &
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Nedungadi, 1994, p. 32). In order to achieve this objective companies must be aware of competitors sharing the same supplier and about their relative position from a supplier’s perspective (Bromwich, 1990; Chen, 1996; Day & Wensley, 1988). However, most companies neglect to consider competitor intelligence in purchasing decisions (Bergen & Peteraf, 2002; Day & Nedungadi, 1994; Ramsay, 2001; Schiele, 2012). This results in a company’s inability to determine whether and how competitive advantage was gained in purchasing activities (Ramsay, 2001, p. 41).
The literature review in the course of this thesis exposed two waves of research analyzing the organizational environmental scanning and the use of competitor intelligence. In the 1980s and 90s there was a first trend of analyzing strategic decisions in this context. At the same time literature about the organizational buying behavior focusing on companies’ purchasing processes began to emerge (Sheth, 1973; Webster Jr & Wind, 1972) and resulted in a variety of general comprehensive models (for a review of existing models of organizational buying behavior see Webster Jr and Wind (1972)). Both, literature on decision making and on strategic purchasing, mainly concluded that strategic decisions should include a broad environmental scanning (Auster & Choo, 1993, 1994; Bromwich, 1990; Bunn, 1993; Dean & Sharfman, 1996; Kraljic, 1983; Lester & Waters, 1989; Sheth, 1973; Webster Jr & Wind, 1972) as well as an in-depth competitor analysis (Chen, 1996; Day & Nedungadi, 1994; Day & Wensley, 1988; Porter, 1980). With the upcoming topics of factor market rivalry and the PCS research about environmental scanning (Frishammar & Åke Hörte, 2005; Insead & Chatain, 2008) and the use of competitor intelligence (Bergen & Peteraf, 2002; Peyrot et al., 2002; Rothberg & Erickson, 2005) in the context of strategic (purchasing) decisions received an apparent boost in the beginning of the 20th century. With regard to the PCS, literature mainly focused on the advantages and effects of this status (Dyer & Hatch, 2006; Hüttinger et al., 2012; Schiele et al., 2011; Schiele, 2012; Schiele et al., 2012a) and its antecedents (Essig & Amann, 2009; Hüttinger et al., 2012; Ramsay & Wagner, 2009), while not much research has been dedicated to analyze how a buying firm can achieve this status (Hüttinger et al., 2012; Schiele et al., 2012a). Although there have already been preliminary attempts to study how to achieve this status based on the link between customer attractiveness, supplier satisfaction and PCS (Baxter, 2012; Schiele et al., 2012a), the role of purchasing decisions leading to this preferential treatment is less well-understood.
Knowing how to achieve the PCS therefore poses new managerial challenges in the context of purchasing decision making. The overall objective of this paper is to extend existing theory about the preferred customer status and link it to strategic purchasing decisions. Based on existing theory about competitor intelligence, the assumption is that using this kind of information enables a company to receive the PCS. Thus, the aim is to analyze strategic purchasing decisions with regard to the use of competitor information and their effects on a company’s competitive capability in terms of resource allocation. In this context, competitor information refers to information about the supplier’s other customers, i.e. direct and indirect competitors of the focal firm on this resource market. This in-depth analysis of decision making processes was achieved by a multiple-case study with ten worldwide operating companies. This paper provides a holistic theoretical understanding of the use and effects of competitor intelligence in strategic purchasing decisions on the suppliers’ resource allocation and the
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buyers’ competitive advantage and is therefore a good basis for a following deeper conceptual analysis.
The PCS is granted if the customer ‘is perceived as attractive and if the supplier is currently more satisfied with this customer than with alternative customers’ (Schiele et al., 2012a, p. 1181). That implies that companies need to actively manipulate these components. Being aware of the own position relative to that of competitors helps managers recognize, that even though the relationship might be satisfying, there still might be room for improvement. This paper’s results show that the use of competitor information helps companies make purchasing decisions leading to preferred resource allocation. This detailed competitor information is mainly gathered by internal and external personal relationships. To achieve favorable resource allocation managers need to consider competitor-based information in purchasing decisions to actively influence the supplier’s satisfaction and its attractiveness ultimately enabling a company to achieve competitive advantage.
In the next chapter, the reason for and the importance of the PCS and its antecedents are explained in order to get a basic understanding of the assumptions for the following theory development. Then, strategic purchasing decisions and current literature is analyzed. Focus is set on the use of competitor intelligence in the decision making processes and how that information is gathered by decision makers. These insights help formulate the research questions as well as an appropriate and testable research framework, presented in the latter part of this paper. The fifth section shows the results of this exploratory analysis supported by multiple cases from several industries varying in the company size (annual revenue), while the last part provides a summary of the theoretical and practical implications as well as limitations and directions for further research.
2. Background
2.1. Resource competition and competition within supply chains According to the resource-based view, the use and combination of resources and the firms’
capabilities enable companies to have a competitive advantage over competitors (Barney, 1991; Penrose, 1995). However, not all resources a company requires can be created internally but need to be acquired and exploited externally (Nagati & Rebolledo, 2012). This results in strong dependencies of buying companies on their environment (Baxter, 2012, p. 1250; Pfeffer & Salancik, 1978).
Even though the resource-based view is widely accepted, previous literature on competition mainly focused on product markets referring to the output side of a company’s supply chain. Competitors of a focal firm are only considered to perform within the same industry, offering the same products (Markman et al., 2009, p. 424; see e.g. Porter, 1980). With the increasing intensification of competition through globalization, new challenges of offering the right product at the right time and at lowest cost arise. This highlights the importance of a company’s capacity to exploit and benefit from buyer-supplier relationships in the context of resource allocation in order to maintain a competitive advantage (Nagati & Rebolledo, 2012). Competition and efficiencies within organizations therefore are more and more redundant, while theorists and practitioners currently set focus on efficient and competitive supply chains (Li et al., 2006; Markman et al., 2009). Literature highlights the importance of supply chain management for securing competitive advantage in purchasing processes which ultimately
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improves the organizational performance (Hunt & Davis, 2008; Li et al., 2006; Ramsay, 2001, p. 45; Sheth & Sharma, 1997, p. 96). The resulting factor market rivalry is defined as rivalry over resource positions, which may even occur with companies not acting in the same product market but only in the same factor market (Markman et al., 2009, p. 423).
This implies, that in order to maintain a competitive position, companies need to broaden their inter-firm resource perspective and consider suppliers to be part of a company’s resource base (Steinle & Schiele, 2008). Buying firms aim to improve their resource allocation position with regard to external resources procured from suppliers (Insead & Chatain, 2008). This improvement helps obtain better resources than competing firms with whom the focal firm shares their supply base (Steinle & Schiele, 2008). Supplier selection and development, in order to build up close relationships with external partners, might help companies to better attain external resources. Therefore, companies aim at an intense collaboration with suppliers which offer opportunities to access expert knowledge and abilities quicker, to share costs and risks with suppliers and to better use the partners’ expertise (Wognum et al., 2002, p. 341). This is due to the fact that the ‘distinctiveness in the product offering or low costs are tied directly to the distinctiveness in the inputs – resources – used to produce the product’ (Conner, 1991, p. 132). Contrary to that, Dyer and Hatch (2006, p. 703) consider it to be ‘extremely difficult’ for buying firms to obtain competitive advantages through their supply base if buying firms are in rivalry for the best resources. Similarly, Takeishi (2001) points out that no matter how close the relationships of a focal firm with its partners are and no matter how capable these partners are, the company’s competitors also seek for such close relationships. Companies that are able to achieve an intense relationship may enjoy better returns and competitive advantage and vice versa (Takeishi, 2001). Nevertheless, it might be difficult for competitors to neutralize the thereby derived competitive advantage of having a superior supplier base (Hunt & Davis, 2008).
This shift from solely considering competition between organizations in the same industry to competition between supply chains results in the increasing importance of focusing on strategic supply chain management (Li et al., 2006; Markman et al., 2009). On the foreground of the resource-based view, especially the purchasing of resources becomes a critical influencing factor on a company’s competitive advantage. Companies therefore need to be aware of how to master or even reduce rivalry over externally acquired resources in order to strengthen their sustainable competitive advantage over competitors sharing the same supplier (Li et al., 2006; Ramsay, 2001, p. 45; Sheth & Sharma, 1997, p. 96).
2.2. The preferred customer status Based on this development, the PCS has received much academic attention for the last years
(Dyer & Hatch, 2006; Hüttinger et al., 2012; Schiele et al., 2011; Schiele et al., 2012a; Schiele et al., 2012b). With regard to the increasing scarcity of raw materials and factor market rivalry, companies with strong competitors seek to achieve this favorable treatment (Steinle & Schiele, 2008).
A focal company, collaborating with identical suppliers as competitors and purchasing similar products, may however still enjoy a competitive advantage (Dyer & Hatch, 2006; Steinle & Schiele, 2008). This may be the result of the PCS, referring to buyers who receive – intentionally or accidentally – favorable treatment from a supplier in terms of preferential resources allocation compared to competitors sharing the same supplier (Schiele et al., 2011; Schiele et al., 2012a; Steinle & Schiele, 2008). For example, the supplier may assign his best
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personnel and ensure a privileged supply of products to the customer, customize its products with regard to the buyer’s requirements or even offer exclusive agreements (Schiele et al., 2011; Steinle & Schiele, 2008). Furthermore, Ellis et al. (2012, p. 2) found that the PCS strengthens the supplier’s willingness to share technologic innovations with the buyer. As a buyer depends on resources from his suppliers (Baxter, 2012, p. 1250) this preferential resource allocation might provide him with competitive advantage (Hüttinger et al., 2012, p. 2; Steinle & Schiele, 2008, p. 14).
For these reasons, it is imperative for a company to know how to achieve the preferred status granted by suppliers. The concept of the PCS includes two interlinked components, the supplier satisfaction and the customer attractiveness (Hüttinger et al., 2012, p. 2; Schiele et al., 2012a, p. 1178) as this status is granted by a supplier, if the customer ‘is perceived as attractive and if the supplier is currently more satisfied with this customer than with alternative customers’ (Schiele et al., 2012a, p. 1181). Whereas customer attractiveness is value-focused and relies on a future time dimension as well as ex-ante expectation about the customer, the supplier satisfaction results from previous performance and ex-post experience with the buyer (Hald, 2012, p. 1229; La Rocca et al., 2012, p. 1242). Hüttinger et al. (2012, p. 5) established an extensive list of previous identified antecedents of the customer attractiveness including market growth factors (e.g. size), risk factors (e.g. demand stability), technological factors (e.g. commitment to innovation), economic factors (e.g. price/ volume, financial attractiveness, development potential, intimacy, profitability, relational fit) and social factors (e.g. tight personal relations, emotional attachment, familiarity, similarity). Regarding supplier satisfaction the four most important influencing factors are: Financial performance (e.g. profit, sales volume, order volume, serving costs), technology level (e.g. innovation, customer innovativeness as moderating effect), market relations (e.g. market access/ information, interpersonal boundary spanner, and reputation), behavioral patterns (e.g. trustworthiness, predictability in the decision processes, demand stability) (Essig & Amann, 2009, p. 106; Ramsay & Wagner, 2009, p. 130).
Both components, customer attractiveness and supplier satisfaction, might help the buyer to better benefit from the buyer-supplier relationship (Baxter, 2012, p. 1250; Ellegaard et al., 2003, p. 346; Ellegaard & Ritter, 2006, p. 7; Hald, 2012, p. 1229) and increase the possibility to receive a preferential treatment (Baxter, 2012, p. 1250). In order to continuously pursue high customer attractiveness and supplier satisfaction the manipulation needs to be adapted to changes and to the supplier-specific requirements (La Rocca et al., 2012, p. 1246; Nollet et al., 2012, p. 1187). Furthermore, not all factors are equally important to different suppliers so that the weight of the factors used by suppliers will be chosen according to the situation and context (La Rocca et al., 2012, p. 1246).
Overall, customer attractiveness and supplier satisfaction are crucial especially for strategically relevant suppliers or if there exist a lot of alternative buyers. However, profiting from the advantages of the PCS also requires the buyer to work actively to get and continuously maintain this status (Schiele et al., 2011).
The main underlying assumption of this thesis is that companies continuously strive to improve their competitive advantage. This implies that buying companies who are aware of the relationship between customer attractiveness, supplier satisfaction and the PCS seek to actively influence their own position from the supplier’s point of view.
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2.3. Strategic purchasing The objective of inheriting the PCS can be achieved via strategic purchasing which might
help positively influence one’s customer attraction and the supplier satisfaction. Carr and Smeltzer (1997, p. 201) define strategic purchasing as ‘the process of planning, implementing, evaluating and controlling strategies and operating purchasing decisions for directing all activities of the purchasing function towards opportunities consistent with the firm’s capabilities to achieve its long-term goals’. Strategic purchasing leads to the sustainable competitive advantage pursued by companies by facilitating the establishment and maintenance of mutually beneficial inter-organizational relationships (Chen et al., 2004). The capabilities to ‘a) foster close working relationships with a limited number of suppliers; b) promote open communication among supply-chain partners; and c) develop long-term strategic relationship orientation to achieve mutual gains’, are essential for performing strategic purchasing (Chen et al., 2004, p. 505).
Effects of strategic purchasing are not only to establish long-term, strategic and cooperative relationships with all suppliers but also to foster close working relationships with a limited number of dedicated suppliers. Literature also showed a positive correlation between strategic purchasing and financial performance (Chen et al., 2004, pp. 515-517).
2.3.1. Strategic purchasing decisions Strategic decisions are ‘important, in terms of the actions taken, the resources committed, or
the precedents set’ (Mintzberg et al., 1976, p. 246) and are therefore defined as ‘intentional choices or programmed responses about issues that materially affect the survival prospects, well-being and nature of the organization’ (Schoemaker, 1993, p. 107). Furthermore, they ‘(1) involve strategic positioning, (2) have high stakes, (3) involve many of the firm’s functions, and (4) are considered representative of the process by which major decisions are made at the firm’ (Eisenhardt, 1989, p. 546). In general, strategic decisions are based on a structured rational process consisting of activities including intelligence gathering, direction setting, uncovering alternatives, selecting a course of action and implementation (Choo, 1996, p. 329; Eisenhardt & Zbaracki, 1992, p. 27; Mintzberg et al., 1976).
In the context of the resource-based view, seeking for better resource allocation in order to strengthen the own competitive position can be considered as a strategic purchasing decision. These buying decisions in general follow a basic logic or structure for purchasing decision makers. Buyers need to continually assess the buying situation in order to respectively adapt their buying activities (Chen, 1996, p. 329).
As purchasing decisions often are highly complex and uncertain they require effective and efficient decision making processes. Therefore, authors highlight the importance of search for and use of information that is particularly relevant to buying decisions in order to reduce and avoid uncertainty (Carr & Smeltzer, 1997; Sheth, 1973; Webster Jr & Wind, 1972). The higher the impact of these purchasing resources, the higher the strategic value and sustainability of the purchasing function. For strategic decisions in the case of resource similarity it is absolutely necessary to consider the own status relative to the competitors’ (Bromwich, 1990; Chen, 1996) as competitors with low market commonality and high resource similarity are argued to pose the greatest competitive threat (Bergen & Peteraf, 2002; Chen, 1996). The latter established a hierarchy of competitor awareness in combination with resource equivalence in order to provide a framework for competitor identification and competitor analysis (based on the framework of
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Chen, 1996). This framework, facilitating the environmental scanning, indicates that the likelihood of competitive attack and response regarding to indirect competitors generally is low with a high equivalence. Even though, high equivalence increases the likelihood for competitive action, indirect competitors are ‘less likely to be perceived as equivalent ... [and companies] are likely to be less aware that indirect competitors are indeed competitors’ (Bergen & Peteraf, 2002, p. 164).
Bunn (1993) characterized six different buying decision approaches among organizational buyers depending on several variables based on situational characteristics1 and buying activities2. The author concludes that in case of strategic decisions of a buyer with a perceived moderate level of buying power, in general a moderate level of information search and analysis techniques is used. Whereas repurchasing of products show lower uncertainty and is based on established purchasing standards, buying decisions regarding new product types from new suppliers are high in uncertainty and do not follow existing procedures (Bunn, 1993). These results are in line with Kraljic (1983, p. 112) who highlights the importance of good market and supplier data at least for leverage items and especially for strategic products considered in higher level of decision making, such as bottleneck or strategic items.
Literature on buying situations and buying processes consider the buying process as a linear progression from an identified need supported by systematic information gathering and processing in order to come to a rational decision (Bunn, 1993). However, Sheth (1973, p. 55) points out that not all business decisions are the result of a systematic decision making process.
2.3.2. Rationality of strategic decisions The basic idea of decision making assumes that decisions are intended to be rational,
involving relatively comprehensive information and broad knowledge of constraints (Dean & Sharfman, 1996, p. 374) in order to actively improve one’s competitive position (Auster & Choo, 1994). However, some scholars observed limitations regarding the decision makers’ rationality. In an uncertain environment, this bounded rationality refers to the fact that companies formulate anticipations about the future based on available information and in response to previous experience (Cyert & March, 1963; March & Simon, 1958). ‘The intended rationality of an actor requires him to construct a simplified model of a real-life situation in order to deal with it. He behaves rationally with respect to this model, and such behavior is not even approximately optimal with respect to the real world’ (Simon, 1957, p. 198). This simplified model causes decisions based on satisfactory solutions rather than evaluating the best possible alternative for maximizing the outcome (Cyert & March, 1963; March & Simon, 1958; Simon, 1955). This also means that decision making depends on the cognitive ability of the decision maker as well as emotional and habitual aspects (Simon, 1955).
In the context of more realistic competitive decision making processes, Porter (1980) mentions a framework for industry and competitor analysis. His assumption is, that companies’ decisions are biased or based on so-called blind spots, referring to ‘areas where a competitor
1 Situational characteristics are purchasing importance (perceived awareness of the purchasing decision in terms of purchasing size and potential impact), task uncertainty (perceived lack of relevant information), extensiveness of choice set (perceived breadth of available alternatives) and perceived buyer power (perceived negotiation strength) (Bunn, 1993). 2 The authors considers the buying company’s search for information (amount of internal and external information which are considered in the purchasing decision process), the use of analysis techniques (use formal and/ or quantitative tools for evaluation of information), proactive focus (extent to which the decision making is based on strategic objectives and long-range needs), procedural control (policies, procedures or transaction precedents structure the evaluation of purchasing decisions) as variables for the buying activities (Bunn, 1993).
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will either not see the significance of events at all, will perceive them incorrectly or will perceive them very slowly’ (Porter, 1980, p. 59). In other words, decision makers may ignore or misinterpret events happening in their direct environment. He also argues that a company which knows the competitors’ blind spots may be able to identify competitor weaknesses (Porter, 1980).
To eliminate or minimize these blind spots, companies should scan the internal and external environment in order to come to an effective and efficient decision making process (Auster & Choo, 1993; Bunn, 1993; Lester & Waters, 1989; Sheth, 1973). Environmental scanning is defined as ‘management process of using environmental information in decision making’ (Lester & Waters, 1989, p. 5). This process consists of the gathering of information concerning the organization’s external environment, the analysis and interpretation of this information and the use of this intelligence in strategic decision making (SDM) (Lester & Waters, 1989). The more information about the internal and external organizational environment that is considered within decision making processes, the better the conclusions are about possible consequences of alternative actions leading to more successful decisions (Auster & Choo, 1994; Pfeffer & Salancik, 1978). Authors attested that the focus of environmental scanning is set on information about customers, competitors and suppliers (Lester & Waters, 1989) by mainly using personal sources (Auster & Choo, 1993, p. 199). Auster and Choo (1993) conclude that even though the companies’ awareness of the value of environmental scanning constantly increases, they often apply informal and unsystematic approaches leading to problems of integrating the environmental scanning in SDM.
2.3.3. Competitor intelligence for purchasing decisions Competitor intelligence, as part of the environmental scanning, firstly introduced by Porter
(1980), is commonly considered as essential for decision making processes (Bromwich, 1990; Chen, 1996; Webster Jr & Wind, 1972). Nevertheless, literature points out that the necessity of competitive intelligence for an effective and efficient decision making and for competitive actions is often overlooked (Chen, 1996).
Successful companies often monitor their direct competitors and are aware of their actions’ success but neglect to monitor competitors in supply markets (Bergen & Peteraf, 2002). However, in the context of purchasing decisions which are affected by factor market rivalry, scanning the external environment of the competitive landscape is important. Most companies miss to consider their status relative to competitors due to incomplete competitor information (Day & Nedungadi, 1994, p. 32; Ramsay, 2001, p. 41). This causal ambiguity arises ‘when competitors are either unable to determine if an organization has achieved a competitive advantage as a result of some purchasing activity, or know that such an advantage exists but are unable to determine how it was achieved’ (Ramsay, 2001, p. 41). Literature states that few companies consider competitor-oriented information in their decision making processes (Day & Nedungadi, 1994, p. 36)3.
3 The study’s result of Day and Nedungadi (1994) show that only few companies focus on the competitor-centered view (13%), whereas the self-centered (41%), customer-oriented (30.5%) and the market-driven (15.5%) views are more often applied by companies. Self-centered companies do not asses advantages by using customer or competitor information. The customer-oriented measures emphasize on segment differences and differentiation advantages relying on customer comparisons using e.g. choice models; customer satisfaction and loyalty surveys; and relative shares of end-user segments. The market-driven view combines both, the customer-oriented and competitor-centered view (Day & Nedungadi, 1994).
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External environmental scanning prerequisites processes of selective search and attention, selective perception and simplification to understand markets, segments, competitive forces and entry barriers (Day & Nedungadi, 1994, p. 31). This competitor analysis helps create a detailed image of the competitive environment assessing a focal companies competitive positions and relationships with competing firms (Chen, 1996). Thereby, competitor intelligence is gathered, which has the objective ‘to develop a profile of the nature and success of likely strategy changes each competitor might make, each competitor’s probable response to the range of feasible strategic moves other firms could initiate and each competitor’s probable reaction to the array of industry changes and broader environmental shifts that might occur’ (Porter, 1980, p. 47). Companies assessing the competitors’ positions usually form representations of their own position, enriched by competitor information, which help to anticipate competitive actions and reactions. In this case, the buying firm’s strategic actions are based on the comparison of the own resources and capabilities with competitors serving to formulate expectations about the competitors’ reactions (Day & Nedungadi, 1994, p. 32). These competitor-centered comparisons mainly emphasize on managing ‘judgments of strengths and weaknesses, comparisons of resource commitments and capabilities, value chain comparisons of relative costs, and market share and relative profitability’ (Day & Nedungadi, 1994, p. 34). They are especially appropriate for companies in markets with strong competitors which aim at defending competitive actions (Day & Nedungadi, 1994, p. 41).
Companies must have a complex, multidimensional picture of all points of dominance or inferiority compared to buyers sharing the same supplier including the competitors’ actions and movements (Day & Nedungadi, 1994, p. 32; Insead & Chatain, 2008). This includes the awareness of a company about its own position compared to that of competitors and how these competitive advantages are gained by purchasing activities (Day & Wensley, 1988). This awareness is crucial to a company’s action and the main driver of competitive attack and response (Chen, 1996, pp. 101-102). This understanding of a company’s own capabilities and environmental factors facilitates successful decision making (Dean & Sharfman, 1996, p. 389) and can lead to preferential treatment.
Overall, it is questionable whether buyers really know which resources competitors receive from shared suppliers and what status they inherit compared to competitors, as most companies do not consider competitor information within purchasing decisions (Day & Nedungadi, 1994, p. 32; Ramsay, 2001, p. 41). Even though a company might be satisfied with the relationship to the supplier, a competitor might receive preferential treatment. Further, it is unknown if the use of information and knowledge about suppliers and competitors pays off and the preferential resource allocation as well as the competitive advantage are positively influenced (Bergen & Peteraf, 2002). Results by Frishammar and Åke Hörte (2005) also expose that by considering information about competitors a company’s innovation performance is negatively affected. Nevertheless, for achieving the PCS Schiele (2012, pp. 48-49) explicitly highlights the importance of knowing one’s own status relative to the competitors’ in order to pursue a respective resource-based strategy.
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3. Research problem and aim
3.1. Research problem To scan the problem in current literature, a literature review helped gain insights in state-of-
the-art literature about environmental scanning in the context of strategic decision making. Furthermore, a more detailed view on competitor intelligence and competitor analysis with regard to strategic decisions exposed that the first assumptions about companies neglecting to use competitor information in purchasing decisions is supported by the missing literature on this subject (see Table 1). The following table clearly shows that in the 90s environmental scanning and competitor analysis were a very popular subject to literature. Recently, a new discussion about competitor analysis arises with the upcoming awareness about factor market rivalry and the PCS. However, there is an apparent neglect of literature analyzing competitor intelligence in the context of strategic purchasing decisions.
Research field Environmental Scanning Competitor Intelligence / Competitor Analysis
Strategic Decision Making
Lester and Waters (1989) Bromwich (1990) Auster and Choo (1993) Auster and Choo (1994) Dean and Sharfman (1996)
Porter (1980) Day and Wensley (1988) Bromwich (1990) Day and Nedungadi (1994) Chen (1996) Bergen and Peteraf (2002) Peyrot et al. (2002) Rothberg and Erickson (2005)
Organizational Purchasing Decisions
Webster Jr and Wind (1972) Sheth (1973) Kraljic (1983) Bunn (1993) Frishammar and Åke Hörte (2005)
Insead and Chatain (2008)
Table 1: Overview of relevant literature
Several papers exist on environmental scanning related to general SDM. Even more scholars deeply analyze the use of competitor intelligence or competitor analysis, as part of environmental scanning, in the organizational context related to general strategic decisions. With regard to strategic purchasing decisions, few authors also examine environmental scanning as a basis for decision making referring to information about competitors, customers and the general market. That implies that literature proposes to use external information for decision making, but does not analyze exactly what kind of information, e.g. competitor-based information, is especially relevant for purchasing decisions. Furthermore, this stream of literature does not thoroughly analyze the role and effects of competitor intelligence on the decisions outcome.
Worth mentioning are especially the papers by Frishammar and Åke Hörte (2005) as well as Insead and Chatain (2008). The results by Frishammar and Åke Hörte (2005) indicate that environmental scanning is one important factor for innovation management, also referring to purchasing aspects. By focusing on factor market rivalry, Insead and Chatain (2008) highlight
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the importance of a focal company’s competitors’ resource-oriented strategy – based on competitor analysis – in order to foster its own resource position relative to that of (direct and indirect) competitors’. The authors set focus on analyzing the use of competitor intelligence in the context of purchasing decisions and deeply examine a focal company’s actions with regard to competitive attack and response in order to control its resource environment. However, they miss to analyze how the use of competitor intelligence affects a company’s strategic purchasing decisions and how this might lead to a better resource allocation and to the PCS.
On the foreground of literature on the resource-based view factor market rivalry and the PCS, one can assume that for achieving the PCS competitor intelligence must be used. Purchasing decisions considering this kind of information increase a company’s awareness about competitors sharing the same supplier and thereby lead to a better outcome. This outcome then positively affects the buyer-supplier relationship as well as the customer attractiveness and the supplier satisfaction. This might lead to a preferential resource allocation. Therefore, a relationship between the use of competitor information and preferential resource allocation, mediated by the buyer’s SDM is expected. Finally, by aiming at achieving preferential treatment with the help of competitor information in SDM processes a company may be able to increase its competitive advantage and profitability. Being aware of these antecedents of strategic decisions also implies that a company might be able to manipulate them in order to optimize the decisions’ consequences.
3.2. Research aim While literature analyzes the effects and advantages of the PCS on the buying firm’s
resources and innovativeness, a comprehensive picture – based on the linkage of customer attractiveness, supplier satisfaction and PCS – how a buying firm can achieve this status is missing (Hüttinger et al., 2012; Schiele et al., 2012a). Until now literature has not analyzed to what extent and to what degree companies try to foster their own status using competitor information within their SDM processes nor has considered the outcome of purchasing decisions as influencing factors for the buyer-supplier relationship. Thus, currently it is unknown how companies may receive or maintain the PCS by using competitor information about competitors sharing the same supplier.
To address this gap, this thesis aims to explore buyer-supplier relationships in-depth and to examine how strategic decisions may influence this relationship by using information about competitors sharing the same supplier. By analyzing what kind of competitor intelligence firms apply in purchasing decisions, conclusions about the role of competitor intelligence in those decisions can be derived and assumptions about its impact on the suppliers’ resource allocation and the buying firm’s competitive advantage can be made. This helps formulate conclusions and enlarge current literature about the buyer-supplier relationship and the decisions’ effects on the resource allocation.
3.3. Research question and framework The objective of this research is to elaborate a company’s use of information about
competitors with regard to suppliers in purchasing processes in order to show how the company can use this information to maintain or achieve the status of a preferred customer. The central question of this thesis is: ‘How does the consideration of information about key competitors sharing the same supplier influence purchasing’s strategic decision making?’
12
The elements of this thesis can be visualized within the following framework (see Figure 1).
Figure 1: Research framework
The overall research question is divided in the three following sub-questions, which are aligned with the research framework. (RQ1) How are strategic decisions in the purchasing process made?
The first step is to elaborate important strategic decisions within the purchasing process of companies. This is to get insights in the company’s way of mental models affecting SDM processes and to elaborate potential mechanisms or systems helping companies to gather relevant information. Furthermore, a basic understanding of how the use of competitor information may influence the result of SDM processes can be gained.
Based on the definition by Mintzberg et al. (1976, p. 246) and Schoemaker (1993, p. 107) supplier selection and the objective to constantly improve this buyer-supplier relationship are important strategic decisions. Decisions about early supplier involvement are also strategic. Furthermore, others, such as make-or-buy decisions, contract negotiation including tendering procedures and design or innovation collaboration are considered as strategic purchasing decisions.
a. What kind of competitor information is regarded? As previously mentioned, authors highlight the importance of using competitor intelligence
in decision making processes (Bromwich, 1990; Chen, 1996; Porter, 1980; Webster Jr & Wind, 1972). This can be transferred to purchasing decisions. Especially companies aiming at receiving preferential resource allocation should consider competitor information (Schiele, 2012, p. 48).
Using this information as basis for making purchasing decisions this might result in more effective and efficient decisions. If a company is aware about competitors sharing the same supplier and about their actions undertaken, this information must be included in decision making. This kind of competitor information will affect the decision’s outcome accordingly and might lead to better performance.
Therefore, it is essential for a focal company to be aware about direct and indirect competitors which receive similar products from the same supplier. Thereby, a focal company becomes aware of its own status relative to competitors. Other information to consider might be
13
– if available – the purchasing volume of competitors, their strategic relevance for the supplier as well as information about innovation or exclusive product agreements between the supplier and the other customer.
One can assume that companies in general have guidelines or policies giving exact instructions on how to perform strategic purchasing decisions. These policies may also indicate on what kind of information is to be regarded in the decision making process.
b. How is this information collected? Depending on the type of information, multiple information sources should be considered in
the decision making process. Additionally, by validating information via several sources, the information quality can be increased and thus the decisions uncertainty can be reduced (Alejandro et al., 2011). This includes personal sources, e.g. managers and employees within the organization or customers and business associates (Auster & Choo, 1994), as well as newspapers or internal data. Via personal contact to the suppliers’ key account managers or to the competitors’ purchasing departments a company might also obtain competitor intelligence. Furthermore, publically available financial information about competitors may be considered. One can also imagine that events, e.g. trade shows or company presentations, might lead to some information about competitors sharing the same supplier. The supplier is intended to show well-known customers in order to attract new ones; companies then might become aware of competitors sharing the same supplier. To conclude, internal as well as external networking of purchasing responsibles is important in order to gain insights of the customer base of suppliers. The internet can be considered as a cost-effective source of information. It not only helps to improve the supplier selection, but to access critical external knowledge and market research.
(RQ2) What is the role of competitor information in purchasing decision making?
The assumption of this thesis is that using competitor intelligence in purchasing decisions leads to better decisions’ outcome. This is based on the findings from literature, that environmental scanning is an essential prerequisite for efficient and effective decision making (Auster & Choo, 1993; Bunn, 1993; Lester & Waters, 1989; Sheth, 1973). Thus, strategic purchasing decisions are made on the basis on a complete picture of the supplier and risks emerging with a respective decision. A complete picture then reduces a focal company’s uncertainty regarding this supplier and leads to a well-elaborated decision.
Therefore, the assumption is that companies gathering competitor intelligence in strategic purchasing decisions also allocate importance to this information. If the information is accessible one should not neglect it. The role of the collected competitor information on the purchasing decision is assumed to be high (or at least equally-weighted with other information used within the decision) and ultimately positively affects the decision’s outcome.
(RQ3) How can the use of competitor information throughout the purchasing decision process influence suppliers’ resource allocation?
Assuming that competitor-based purchasing decisions positively affect the decision’s outcome, this result is considered to be better compared to decisions not based on this kind of information. Better, in this context, means that the outcome also positively affects the buyer-supplier relationship. Thereby, the resource allocation granted by the supplier to the buyer also becomes better compared to other customers of this supplier. For example, the focal company
14
might be early involved in the supplier’s innovation process, or receive resources cheaper and faster, especially in supply bottlenecks. This more effective and efficient resource allocation might ultimately lead to have competitive advantage over competitors.
If a company is aware about this relationship between competitor-based strategic purchasing decision and the suppliers’ resource allocation, it also might actively try influencing the suppliers’ resource allocation by making respective decisions.
4. Methodology
4.1. Research design The use of competitor information in strategic purchasing decisions in order to influence
one’s position from a supplier’s perspective is a challenging issue to study. This is mainly due to the fact that little research was dedicated to the relationship of both concepts – the PCS (preferred customer status) and competitor-based purchasing decision making – in the past. On the one hand, only few authors analyzed potential antecedents of the PCS; on the other hand, as already stated above and as clear outcome of this thesis’ literature review, until now not much research was undertaken regarding competitor information used in strategic purchasing decisions. This fact is particularly true regarding questions about what kind of competitor information is collected and to what degree they are considered in those decisions. Furthermore, none of the authors analyzed whether and how this information positively affects the decisions, boosts resource allocation and enables companies to achieve competitive advantage.
To deal with this unexplored topic, an exploratory research design was chosen (Yin, 2003). This research design is suitable with regard to the objective of gaining insights into the entire setting of this idea as until now there exist no literature about strategic purchasing decisions in the context of the PCS. By mainly providing qualitative data, the exploratory design helps provide a better understanding of the phenomenon at hand and acquire rich and meaningful insights.
To answer ‘how’ research questions in the context of an unexplored research field, literature proposes several techniques to be applied in exploratory research designs, namely literature searches (secondary data), experience surveys, pilot studies or case studies (McCutcheon & Meredith, 1993; Yin, 2003). Considering the purpose of this thesis – to explore buyer-supplier relationships in-depth and to examine how competitor intelligence in strategic purchasing decisions may influence the supplier’s resource allocation – the case study methodology is suitable to intensively focus on this contemporary issue. Thereby, the phenomenon can be investigated in-depth and in its real-life context. This also helps obtain information about respective buyer-supplier relationships. This ultimately yields a complete and holistic understanding of the context and complexity of the phenomenon (Miles & Huberman, 1984; Yin, 2003). Therefore, this exploratory multiple-case study can be considered as a first step for theory building about the use of competitor intelligence in the context of strategic purchasing decisions.
Aiming at more robust and compelling results, this thesis is based on a multiple-case study (Miles & Huberman, 1984; Yin, 2003). As the cases are analyzed and compared in their totality, this multiple-case study is based on a holistic view, i.e. one level of analysis (Yin, 2003). This refers to the use of competitor intelligence in strategic purchasing decisions. By analyzing several cases a between-case analysis may help understand similarities and differences between
15
cases including subtle variations whereby replication might be possible. This might allow the generalization of findings (Meredith, 1998; Yin, 2003).
The following table gives an overview of the study profile. Details regarding the interviews in the context of this multiple-case study are given in the following chapter 4.2.
Method Exploratory multi-case study with holistic view
Instrument Individual face-to-face or telephone interviews, semi-structured
Population 25
Sample size 10
Participants One purchasing manager per case
Table 2: Study profile
Via the author’s personal and professional contacts a total of 25 companies were contacted; 18 of which responded to the request. As the cases are chosen on the basis of theoretical preliminary ideas about the use of competitor intelligence in decision making, a strict selection of interview partners regarding this thesis’ objectives was executed. In order to study the concept of competitor intelligence in strategic purchasing decisions the criterion for this elaboration was whether the companies currently use competitor intelligence in strategic purchasing. Preliminary consultations with the interview partners helped select ten companies appropriate for this multiple-case study. Companies initially stating that they do not consider this kind of information in decision making were not suitable for this thesis’ objective.
For this exploratory multiple-case study a small and non-representative sample is not critical. Eisenhardt (1989) recommends to select four to ten cases; similar, Miles and Huberman (1984) suggest to select a maximum of 15 cases, depending on the complexity of the case study. For a short introduction about these companies including financial key figures see Table 3.
Company Industry Annual Revenue4
No. of Employees
Interviewee
Company A (OEM5)
Manufacturing and engineering6
< € 1 billion < 10,000 Purchasing manager for the product group of technical plastics injection moldings
Company B (OEM)
Manufacturing6 € 1-5 billion < 10,000 European purchasing manager for engines and engine parts (since 2009)
Company C (OEM)
Heating systems € 1-5 billion < 10,000 Sourcing manager Asia (since 2006)
Company D Manufacturing6 € 1-5 billion < 20,000 Global purchasing manager for
4 For confidentiality reasons, the companies‘ revenues are clustered in four ranges: < € 1 billion; € 1-5 billion; € 5-15 billion; > € 15 billion. 5 OEM – Original equipment manufacturer, manufactures products or components that are purchased by another company and retailed under that purchasing company's brand name. 6 Due to anonymity reasons, a more precise indication of the industry or branch this company operates in is not possible.
16
(OEM) engines (since 2011)
Company E (OEM / first-tier supplier)
Manufacturing of automation technology for various industries
€ 1-5 billion < 20,000 Global sourcing manager for the product group of pneumatics (since 2003)
Company F (First-tier supplier)
Manufacturing and engineering for various industries
€ 5-15 billion < 50,000 European purchasing manager for the product group of hydroelectric equipment (since 2008)
Company G (OEM / first-tier supplier)
Mining and construction
€ 5-15 billion < 50,000 Proprietary sourcing manager China (since 2010)
Company H (First-tier supplier)
Manufacturing and engineering for automotive industry
> € 15 billion < 100,000 Global commodity manager for the product group of bearings (since 2012)7
Company I 8 (OEM / first-tier supplier)
Automotive industry > € 15 billion < 60,000 Global purchasing manager for engine parts (since 2011)
Company J 8 (OEM)
Automotive industry > € 15 billion < 50,000 Purchasing manager for the product group of security parts for passenger vehicles (since 2008)
Table 3: Overview of companies covered by the study
4.2. Data collection The multiple-case study was conducted with ten companies with the help of several types of
data. The first step was to gather insights in the research field which is realized by analyzing qualitative secondary data sources, while the second step refers to the interviews held with the selected companies and – if feasible – the analysis of additional data provided by some companies.
In the beginning, a literature review about current research regarding the PCS and purchasing decisions using competitor information helped establish a basic understanding about the research background. Due to these insights an appropriate research framework as well as the research question including several sub-questions was derived (see chapter 3.3).
Based on these insights gained in the literature review, interview questions were prepared in order to explore the selected cases and the phenomenon at hand. Aiming at answering the three subordinated research questions, a semi-structured questionnaire with open questions is suitable for this exploratory research design. Semi-structured interviews are a flexible technique for
7This participant has been working in the Purchasing business unit of this particular company for more than 10 years and became Global Commodity Manager one year ago. 8 Both, Company I and J, are part of the same group company.
17
small-scale research, such as case studies (Wengraf, 2001, p. 97). Furthermore, they are well suited for the exploration of the perceptions and opinions of the interviewees, being involved in the situation at hand, regarding complex and sensitive issues. They help probing for more detailed information and clarifying relevant issues (Barriball & While, 1994, pp. 328, 334). In order to guarantee that all issues are covered within the interviews an interview guideline was established on the basis of the previously performed secondary data analysis (see Appendix A) (Barriball & While, 1994, p. 333). This ultimately leads to conveying equivalence of the meaning, although not using the exactly same wording in each interview. Thereby, it is possible to standardize the semi-structured interview aiming at increasing comparability (Barriball & While, 1994, p. 330). In order to ensure that all interviewees had the same understanding of the topic at hand, summary of the topic, including definitions and the research background, was provided. Thereby, misunderstandings or interpretations of the wordings differing from interviewer to interviewees were eliminated as much as possible. One pretest interview was performed in order to test the comprehensibility of the interview questions and to reveal need for changes. However, an adaption of the interview questions was not necessary (Barriball & While, 1994, p. 333).
With regard to the overall research question, the interviews focus on the use and effects of competitor intelligence with regard to strategic purchasing in the respective company. The interview questions cover the entire field of collecting and using competitor intelligence for strategic purchasing decisions as well as its influence on the decisions’ outcome. Competitor information in this context does not only consider direct competitors but also includes indirect ones, operating in another industry or market; all of them sharing the same supplier, i.e. competing for identical input factors.
Considering the use of competitor intelligence to influence a company’s status from the perspective of suppliers, the interviewees all are managers who have the authority to actually make purchasing decisions and thereby influence the final outcome of the latter. Therefore, purchasing managers are considered as an appropriate sample for the interviews (see Table 3).
All interviews were held within 60 minutes and transliterated after the sessions. These reports were sent to the interview partners for review and approval. Checking the findings from the interviews with the participants enhances the validity of the individual interpretation by the interviewer (Hartley, 2004, p. 330). Most of the interview partners (8 out of 10) directly approved the report and no modification was necessary. In case of comments by the participant, the report was adapted and resent for approval. The following Table 4 gives an overview on the interview setup.
Furthermore, continuative documents (e.g. guidelines or process definitions) provided by some companies helped to deepen the understanding about strategic decision making. However, access to secondary data was not feasible for all companies due to confidentiality reasons (4 out of 10). These various sources of evidence helped reduce the risk of biases by early impressions gained during the interviews (Hartley, 2004, p. 330). Relying on multiple sources for data collection, referring to triangulation, increases the construct validity of this thesis (Hartley, 2004; Yin, 2003, p. 330). All documents analyzed confirmed the findings gained in the course of the interviews; none of the interviewees made statements which were not in line with the provided documents. Therefore, one can assume that purchasers, not providing secondary data,
18
also strictly rely to guidelines and policies provided by their companies and that their actions are not deviate from their theoretical planning.
Company Date of interview
Type of interview
Number of contact moments
Secondary data sources
Company A August, 6th 2013
Telephone 2 Process definition for purchasing activities Classification scheme for suppliers
Company B August, 7th 2013
Telephone 2 Process definition for purchasing activities
Company C August, 14th 2013
Face-to-face
2 N.a. (confidential)
Company D August, 14th 2013
Telephone 3 Purchasing strategy Porter Matrix and SWOT for the
respective relationship
Company E
August, 15th 2013
Face-to-face
2 Purchasing strategy Scoring method Porter Matrix and SWOT for the
respective relationship
Company F August, 7th 2013
Telephone 3 N.a. (confidential)
Company G July, 23rd 2013
Telephone 2 Process definition for purchasing activities
Company H July, 24th 2013
Face-to-face
2 Process definitions for purchasing activities and supplier selection criteria
Company I July, 24th 2013
Telephone 2 N.a. (confidential)
Company J August, 2nd 2013
Telephone 2 N.a. (confidential)
Table 4: Overview of interviews and data sources
To further enhance reliable results a complete chain of evidence about all gathered data is essential (Eisenhardt, 1989; Yin, 2003). Aside from recording and transliterating all interviews additional information as well as data, provided by the participants, are documented thoroughly.
4.3. Data analysis To increase the reliability of results, the data analysis consists of five steps pursued by two
different individuals. Figure 2 illustrates the different steps performed in the data analysis. As the interview questions indicate, the collected data is – based on the main elements of the
research framework – organized into three main sections relating to the subordinated research questions. Thus, the first step after the interviews was to transliterate them and summarize the major findings per case and per section in order to get an overall understanding of competitor-based decision making.
19
Figure 2: Steps of data reduction and analysis
Secondly, the transliterated reports per interview were analyzed carefully. In order to reduce data complexity, the aim was to construct a grouping system indicating different patterns or elements of competitor intelligence in combination with strategic purchasing decisions. This helps examine the data in detail and to find similar or contradicting findings (Hartley, 2004, p. 329).
Due to the individual interpretation and personal judgment by the interviewer the results may be highly subjective. To reduce such biases which are very likely in interviews and to increase intercoder reliability, an independent person9 was asked to validate the preliminary findings. Intercoder reliability is a critical component of the content analysis; it helps validate the grouping system and establishes a higher level of reliability (Lombard et al., 2002, p. 589). In order to do so, the interview transcripts were read and analyzed by this external reviewer. The latter used the established grouping system (without knowing the preliminary findings of the author) and systematically matched the answers given in the course of the interviews to the respective groups.
Subsequently, the preliminary findings of both, the interviewer and the reviewer, were matched and compared. Overall, the grouping by different persons was very similar as the system is respective of the structure of the interview questions. For 7 out of 100 allocations of answers (regarding research question 2 and 3) there existed disagreements in the grouping of results. A discussion of the interviewer and reviewer exposed that the different grouping resulted from the fact that the interviewee himself used different wordings for same context. Finally, this process helped established groups which are internally homogeneous and externally heterogeneous. Additionally, they are free of objectivity and show high reliability (Lombard et al., 2002, p. 593).
Based on this grouping system, the results presented in chapter 5 are summarized in tables and subsequently discussed in more detail (between-case analysis).
9 This independent person was a fellow student of the author with the same study background. This was a prerequisite as it is assumed that having a similar background and understanding would lead to the same perception and categorization.
20
21
5. Findings
The following section is, respective of the structure of the research questions and interviews,
separated into three parts. Firstly, the general findings are summarized in a table and briefly
presented. Subsequently, an interpretation of the findings is given and cases, showing
exceptional or surprising results, are explained in more detail.
5.1 Strategic purchasing decisions
5.1.1 Making strategic purchasing decisions
This chapter answers research question 1 (‘How are strategic decisions in the purchasing
process made?’). Table 5, summarizing the key findings with regard to general purchasing
decisions, is followed by a discussion of the main thoughts.
General findings
According to the interviewees and in line with the definition given in literature (Eisenhardt &
Zbaracki, 1992, p. 546; Mintzberg et al., 1976, p. 246; Schoemaker, 1993, p. 107), strategic
decisions are crucial for the survival and well-being of a company. Additionally, literature and
practice impute high stakes to strategic purchasing decisions, which often are jointly made by
diverse departments or functions. In the course of the interviews, most participants refer to
decisions about joint product innovations or early supplier involvement.
As proposed by literature (Choo, 1996, p. 329; Eisenhardt & Zbaracki, 1992, p. 27;
Mintzberg et al., 1976), the interviewees consider their strategic decisions to be based on a
structured process consisting of several activities defined in corporate guidelines. According to
the interviewees this includes – based on the defined purchasing strategy – intelligence
gathering with regard to current trends, suppliers and competitors, as well as uncovering and
selecting alternatives. Company G, I and J state, that these guidelines differ depending on the
size of the purchase volume. Higher volume implies that companies have stricter rules and
include more individuals and departments (e.g. controlling or research and development) in the
decision making process. Additionally, some of the companies (Company G, H, I and J) apply
regular supplier evaluations. Thereby, companies aim at having a well-established and highly
qualified supplier base they firstly resort to in strategic purchasing decisions.
All of the companies interviewed classify potential suppliers with the help of quantitative as
well as qualitative criteria. With regard to quantitative criteria the companies rely on
information such as financial situation, sourcing conditions and total cost of ownership. The
supplier’s suitability in terms of production and delivery as well as previous experience with the
supplier are the most important qualitative factors. Additionally, most companies set up a
supplier profile or a risk assessment. This includes an evaluation of the company’s position from
the supplier’s perspective (is the company considered as strategic customer of this supplier and
does the focal company consider this buyer being strategic for them).
Negligent of strong dependencies from the supplier resulting from a small supplier base,
Company A and B aim at reducing the supplier base (e.g. via consolidating the purchase for
similar product groups). A and B, both being smaller companies10
expect a smaller supplier base
to lead to a closer and more intense relationship in which suppliers are not only considered as
vendors but as partners. This is in line with literature, concluding that organizational strategies
10 Within this thesis, the term ‘smaller company’ is applied for companies having an annual revenue of less than € 5 billion.
22
Cas
e G
uid
elin
es /
poli
cies
app
lied
wit
hin
co
mp
anie
s fo
r
stra
tegic
purc
has
ing
Qu
anti
tati
ve
crit
eria
fir
ms
use
in
str
ateg
ic
pu
rch
asin
g d
ecis
ion
s
Qu
alit
ativ
e cr
iter
ia f
irm
s u
se i
n s
trat
egic
pu
rch
asin
g d
ecis
ion
s
Co
mp
any
A
P
urc
has
ing s
trat
egy
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
G
uid
elin
es f
or
pre
-purc
has
ing
ph
ase
(su
pp
lier
sele
ctio
n &
cla
ssif
icat
ion
)
F
inan
cial
sit
uat
ion
of
sup
pli
er
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
P
rev
iou
s ex
per
ien
ce w
ith
su
pp
lier
S
up
pli
er f
rom
lo
cal
net
wo
rk /
pro
xim
ity
S
up
pli
ers’
cu
sto
mer
s
P
erso
nal
, lo
ng-l
asti
ng
rel
atio
nsh
ip
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w /
exp
erie
nce
, ca
pac
ity
&
qu
alit
y)
Co
mp
any
B
P
urc
has
ing s
trat
egy
G
uid
elin
es f
or
pre
-purc
has
ing
ph
ase
(su
pp
lier
sele
ctio
n &
cla
ssif
icat
ion
)
F
inan
cial
sit
uat
ion
of
sup
pli
er
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
P
rev
iou
s ex
per
ien
ce w
ith
su
pp
lier
S
up
pli
ers’
cu
sto
mer
s
P
erso
nal
, lo
ng-l
asti
ng
rel
atio
nsh
ip
R
edu
ce s
upp
lier
bas
e to
max
imu
m
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w, ca
pac
ity
& q
ual
ity
)
Co
mp
any
C
P
urc
has
ing s
trat
egy
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
G
uid
elin
es f
or
pre
-purc
has
ing
ph
ase
(su
pp
lier
sele
ctio
n,
dev
elop
men
t &
cla
ssif
icat
ion
)
S
cori
ng m
etho
ds
F
inan
cial
sit
uat
ion
of
sup
pli
er
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
C
han
ges
in
mat
eria
l p
rice
s
S
up
pli
er p
rofi
le (
size
, re
ven
ue,
…)
P
rev
iou
s ex
per
ien
ce w
ith
su
pp
lier
P
erso
nal
, lo
ng-l
asti
ng
rel
atio
nsh
ip
D
ecre
ase
dep
end
enci
es f
rom
su
pp
lier
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w /
exp
erie
nce
, ca
pac
ity
&
qu
alit
y)
S
up
pli
er p
rofi
le (
cust
om
ers,
mar
ket
,…)
E
thic
al f
acto
rs
Co
mp
any
D
P
urc
has
ing s
trat
egy
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
G
uid
elin
es f
or
pre
- purc
has
ing
ph
ase
(sup
pli
er
sele
ctio
n,
dev
elop
men
t &
cla
ssif
icat
ion
)
S
cori
ng m
etho
ds
F
inan
cial
sit
uat
ion
of
sup
pli
er
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
P
rev
iou
s ex
per
ien
ce w
ith
su
pp
lier
R
isk
ass
essm
ent
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w /
exp
erie
nce
, ca
pac
ity
&
qu
alit
y)
S
up
pli
er p
rofi
le (
cust
om
ers,
mar
ket
,…)
A
pp
lica
tio
n o
f P
ort
er’s
Fiv
e F
orc
es a
nd
SW
OT
Co
mp
any
E
P
urc
has
ing s
trat
egy
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
G
uid
elin
es f
or
pre
- purc
has
ing
ph
ase
(sup
pli
er
sele
ctio
n,
dev
elop
men
t &
cla
ssif
icat
ion
)
N
eces
sity
for
regu
lar
suppli
er e
val
uat
ion
S
upp
lier
cla
ssif
icat
ion
S
cori
ng m
etho
ds
F
inan
cial
rat
ing
s
P
rice
T
ota
l co
st o
f o
wn
ersh
ip
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w /
exp
erie
nce
)
S
up
pli
er p
rofi
le (
cust
om
ers,
mar
ket
,…)
A
pp
lica
tio
n o
f P
ort
er’s
Fiv
e F
orc
es a
nd
SW
OT
E
thic
al f
acto
rs
23
Co
mp
any
F
P
urc
has
ing s
trat
egy
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
G
uid
elin
es f
or
pre
-purc
has
ing
ph
ase
(su
pp
lier
sele
ctio
n,
dev
elop
men
t &
cla
ssif
icat
ion
)
F
inan
cial
sit
uat
ion
of
sup
pli
er
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
T
ota
l co
st o
f o
wn
ersh
ip
R
isk
ass
essm
ent
P
rev
iou
s ex
per
ien
ce w
ith
su
pp
lier
D
ecre
ase
dep
end
enci
es f
rom
su
pp
lier
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w, ca
pac
ity
& q
ual
ity
)
E
thic
al f
acto
rs
Co
mp
any
G
P
urc
has
ing s
trat
egy
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
G
uid
elin
es f
or
pre
-purc
has
ing
ph
ase
(su
pp
lier
sele
ctio
n,
dev
elop
men
t &
cla
ssif
icat
ion
)
S
elec
tion
cri
teri
a m
ainly
reg
ard
ing
pro
du
ct a
nd
serv
ice
qual
ity
S
cori
ng
met
ho
ds
F
inan
cial
sit
uat
ion
of
sup
pli
er (
pub
lic
info
rmat
ion
& r
atin
gs
by
ag
enci
es)
S
ou
rcin
g
S
up
pli
er l
oca
ted
in p
rox
imit
y
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w /
exp
erie
nce
, d
esig
n
cap
abil
ity
, ca
pac
ity &
qu
alit
y)
P
rodu
ct a
nd
ser
vic
e q
ual
ity
ass
essm
ent
S
up
pli
er p
rofi
le (
cust
om
ers,
cap
acit
y s
har
e w
ith
com
pet
ito
rs)
R
isk
ass
essm
ent
Co
mp
any
H
P
urc
has
ing s
trat
egy
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
incl
udin
g s
ourc
ing
dec
isio
n b
oar
d a
nd
ou
tlo
ok
of
ord
er p
laci
ng
(co
nso
lidat
ion
of
ord
ers,
du
al
sourc
ing s
trat
egy)
G
uid
elin
es f
or
pre
-purc
has
ing
ph
ase
(su
pp
lier
sele
ctio
n,
dev
elop
men
t &
cla
ssif
icat
ion
)
F
inan
cial
sit
uat
ion
of
sup
pli
er (
pub
lic
info
rmat
ion
& r
atin
gs
by
ag
enci
es)
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
T
ota
l co
st o
f o
wn
ersh
ip
C
han
ges
in
mat
eria
l p
rice
s
D
ecre
ase
dep
end
enci
es f
rom
su
pp
lier
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w /
exp
erie
nce
, ca
pac
ity
&
qu
alit
y)
Co
mp
any
I
P
urc
has
ing s
trat
egy /
str
ateg
y p
aper
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
G
uid
elin
es f
or
pre
-purc
has
ing
ph
ase
(su
pp
lier
sele
ctio
n,
dev
elop
men
t &
cla
ssif
icat
ion
)
R
ule
s of
conduct
wit
h r
egar
d t
o s
up
pli
ers
S
upp
lier
sel
ecti
on
cri
teri
a
D
ual
sourc
ing s
trat
egy
F
inan
cial
sit
uat
ion
of
sup
pli
er (
pub
lic
info
rmat
ion
& r
atin
gs
by
ag
enci
es)
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
T
ota
l co
st o
f o
wn
ersh
ip
P
rev
iou
s ex
per
ien
ce w
ith
su
pp
lier
R
isk
ass
essm
ent
A
pp
lica
tio
n o
f K
ralj
ic M
atri
x a
nd
Po
rter
’s F
ive
Fo
rces
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w /
exp
erie
nce
, ca
pac
ity
&
qu
alit
y)
D
ecre
ase
dep
end
enci
es o
f su
pp
lier
an
d f
rom
sup
pli
er (
equ
al s
up
pli
er p
ort
foli
o)
Co
mp
any
J
P
urc
has
ing s
trat
egy /
str
ateg
y p
aper
P
roce
ss d
efin
itio
ns
for
purc
has
ing
act
ivit
ies
G
uid
elin
es f
or
pre
-purc
has
ing
ph
ase
(su
pp
lier
sele
ctio
n,
dev
elop
men
t &
cla
ssif
icat
ion
)
R
ule
s of
conduct
wit
h r
egar
d t
o s
up
pli
ers
S
upp
lier
sel
ecti
on
cri
teri
a
‘Forw
ard
sourc
ing’
acti
vit
ies
F
inan
cial
sit
uat
ion
of
sup
pli
er (
pub
lic
info
rmat
ion
& r
atin
gs
by
ag
enci
es)
S
ou
rcin
g c
ond
itio
ns
(pri
ce, d
eliv
ery
,…)
T
ota
l co
st o
f o
wn
ersh
ip
P
rev
iou
s ex
per
ien
ce w
ith
su
pp
lier
R
isk
ass
essm
ent
S
uit
abil
ity o
f su
pp
lier
fo
r p
rod
uct
/ c
om
po
nen
t
(tec
hn
ical
kn
ow
-ho
w /
exp
erie
nce
, ca
pac
ity
&
qu
alit
y)
D
ecre
ase
dep
end
enci
es o
f su
pp
lier
an
d f
rom
sup
pli
er (
equ
al s
up
pli
er p
ort
foli
o)
Tab
le 5
: P
urc
has
ing d
ecis
ion m
akin
g p
roce
sses
and i
nfo
rmat
ion c
onsi
der
ed
24
tend to aim at developing strong relationships with few suppliers especially in regional
networks. (Sheth & Sharma, 1997) Finally, the interviewees consider a small supplier base as a
possibility to better profit from the supplier-buyer relationship and ultimately increase their
competitiveness by locking in good suppliers. Other interviewees (Company C, F, H, I and J),
limiting the overall purchasing volume with each supplier, accentuate that this is not only of
interest for the buyer but also for the supplier to be part of a well-balanced supplier base,
indicating that none of them is listed as being ‘preferred’.
Interpretation
To conclude, one can state that all companies analyzed use similar methods to come to
strategic purchasing decisions. This may result from the fact that suppliers and purchasing
activities are considered as source of competitive advantage. This goes hand in hand with
literature, recently highlighting the importance of an effective and efficient supply chain
management in order to secure competitive advantage (Hunt & Davis, 2008; Li et al., 2006;
Markman et al., 2009; Ramsay, 2001; Steinle & Schiele, 2008). The change from traditional cost
orientation in purchasing towards a holistic and well-defined purchasing strategy becomes
evident. The overall trend of working with fewer suppliers, performing global sourcing
activities, and partnership agreements implies that purchasing managers consider the
relationship with suppliers to be strategic per se. To overcome the major challenge of constantly
responding to customer needs by delivering the right products to the right target groups in the
right time, purchasing strategies, which are derived from the overall business strategies, are
essential.
Literature proposes that especially for strategic purchases with high uncertainty information
search and analysis with regard to the supplier and the market are highly important (Bunn, 1993;
Kraljic, 1983) in order to come to effective and efficient purchasing decisions (Auster & Choo,
1993; Bunn, 1993; Lester & Waters, 1989; Sheth, 1973). This recommendation is widely
accepted by the companies analyzed, as they perform an external environmental scanning to
come to make well-elaborated strategic purchasing decisions.
Specific findings
With regard to qualitative criteria, Company A additionally highlight that they focus on a
close personal relationship, proximity to their supplier base and a well-working regional
network. Being strongly connected with their suppliers, trust and a good-working network are
more important than just observing hard facts. Company B and F additionally mention the
importance of ethical factors. They refer to fair-trade, ethical trading and sourcing or corporate
social responsibility. Also, Company C considers the complexity of the product or special
quality requirements in the decision. This implies that the company assesses whether the
supplier is capable to supply the purchased product or whether he is experienced in this kind of
product.
Only few companies mention well-established frameworks from theory, such as the SWOT
or Kraljic Matrix or Porter’s Five Forces, in order to set up profiles about their suppliers (see
also Porter, 1980, p. 47). This result is in line with Auster and Choo (1993), stating that
companies tend to apply informal and unsystematic information gathering approaches leading to
challenges of integrating the environmental scanning in SDM.
25
As stated by some interviewees, the fact that some criteria conflict each other adds
complexity to purchasing decisions. Purchasing at the lowest price might result in lower quality
of the product or service. This ultimately requires a trade-off between contradicting criteria.
While some companies provide scoring methods for evaluating the supplier in which poor
performance for one criterion may be compensated by a better one in another criterion, some
companies also set up minimum requirements for all criteria.
5.1.2 Use of competitor information in strategic purchasing decisions
To deepen research question 1 this part gives answers to the sub-questions ‘What kind of
competitor information is regarded?’ and ‘How is this information collected?’.
General findings
In the course of strategic purchasing decisions, the use of competitor intelligence highly
varies between the companies interviewed. However, to gather this information the interviewees
in general consider similar sources. Especially with regard to direct competitors sharing strategic
suppliers, companies exactly know what they are doing with respect to suppliers, products and
future product developments (Company H and I). This perception is supported by most of
interviewees. Some soft facts, e.g. on-time delivery or exclusive innovation agreements, seem
also to be accessible for the companies. Furthermore, it is commonly known or perceived by the
interviewees if one buyer enjoys preferential treatment from the supplier. Whether this picture is
complete or whether there might be rivals the respective companies are not aware of could not
be covered in the interview, as it was only performed with the buying side. Company C is aware
of this incompleteness but also mentions that a comprehensive picture is not necessary. This is
due to the fact that they consider – according to Company C – the most important facts about
suppliers and competitors which together with other information in return leads to a well-
elaborated decision.
With regard to more detailed information about competitors, all companies state that it is
nearly impossible to get information about the price paid by other customers of this particular
supplier. Product analyses indeed seem to give indications to the purchasers about the price per
part by separating products into their single components and estimating the costs per
component. In this context, Company E and F also mention legal restrictions given by the
European Union. According to Article 101 TFEU information exchange between competitors or
supply chain partners is prohibited if this would lead to agreements in terms of prices or market
behavior.11
11 The guidelines provide general principles on the competitive assessment of information exchange, including the assessment
under Articles 101(1) and 101(3) TFEU, which are applicable to all types of horizontal co-operation agreements, such as
purchasing agreements. Information exchange takes various forms such as data shared directly between competitors, data shared
indirectly through a common agency or a third party or through the companies’ suppliers or retailers. Even though information
exchange can be beneficial for companies it can also lead to restrictions of competition when it enables companies to be aware
of their competitors’ market strategies. Such types of information exchanges will normally be considered and fined as cartels.
Outside the area of cartels, information exchange is only considered to restrict competition by object where competitors
exchange individualized information regarding intended future prices or quantities. Exchanges of all other types of information,
including current prices, will not be treated as restrictions by object and will be assessed as to their restrictive effects on
competition (see Guidelines on horizontal cooperation agreements;
http://europa.eu/legislation_summaries/competition/firms/l26062_en.htm).
26
Cas
e T
ype
of
com
pet
itor
info
rmat
ion
th
e co
mp
any
has
acc
ess
to /
use
s st
rate
gic
pu
rch
asin
g
So
urc
es o
f co
mp
etit
or
info
rmat
ion
th
e co
mp
any
rel
ies
on
Co
mp
any
A
A
war
enes
s ab
out
all
com
pet
ito
rs s
har
ing
th
e sa
me
sup
pli
er
O
n-t
ime-
del
iver
y f
or
the
sup
pli
er’s
oth
er c
ust
om
ers
E
xcl
usi
ve
agre
emen
ts o
f su
pp
lier
wit
h i
ts o
ther
cu
sto
mer
s
G
ranti
ng p
refe
ren
tial
tre
atm
ent
I
nte
rnal
net
wo
rk (
emp
loy
ees
pre
vio
usl
y e
mp
loy
ed a
t co
mp
etit
ors
,
emp
loy
ees
wh
ich
wo
rk(e
d)
tog
eth
er w
ith
su
pp
lier
/ c
om
pet
ito
rs)
E
xte
rnal
net
wo
rk (
sup
pli
er’s
pre
sen
tati
on
an
d c
om
mu
nic
atio
n,
trad
e fa
irs,
pro
xim
ity
of
sup
pli
ers
and
thei
r cu
sto
mer
s, o
pen
nes
s in
loca
l n
etw
ork
)
Co
mp
any
B
A
war
enes
s ab
out
all
com
pet
ito
rs s
har
ing
th
e sa
me
sup
pli
er
O
n-t
ime-
del
iver
y f
or
the
sup
pli
er’s
oth
er c
ust
om
ers
E
xcl
usi
ve
agre
emen
ts o
f su
pp
lier
wit
h i
ts o
ther
cu
sto
mer
s
G
ranti
ng p
refe
ren
tial
tre
atm
ent
I
nte
rnal
net
wo
rk (
emp
loy
ees
wh
ich
wo
rk(e
d)
tog
eth
er w
ith
su
pp
lier
/
com
pet
ito
rs)
E
xte
rnal
net
wo
rk (
sup
pli
er’s
pre
sen
tati
on
s an
d c
om
mu
nic
atio
n,
pro
xim
ity
of
supp
lier
s an
d t
hei
r cu
sto
mer
s, o
pen
nes
s in
lo
cal
net
wo
rk)
Co
mp
any
C
A
war
enes
s ab
out
com
pet
ito
rs (
mai
nly
glo
bal
pla
yer
s) s
har
ing
th
e sa
me
suppli
er
O
n-t
ime-
del
iver
y f
or
som
e d
irec
t co
mp
etit
ors
E
xcl
usi
ve
agre
emen
ts o
f so
me
dir
ect
com
pet
ito
rs
G
ranti
ng p
refe
ren
tial
tre
atm
ent
I
nte
rnal
net
wo
rk (
emp
loy
ees
pre
vio
usl
y e
mp
loy
ed a
t co
mp
etit
ors
,
emp
loy
ees
wh
ich
wo
rk(e
d)
tog
eth
er w
ith
su
pp
lier
/ c
om
pet
ito
rs)
E
xte
rnal
net
wo
rk (
op
enn
ess
on
th
e A
sian
mar
ket
wit
h t
his
kin
d o
f cr
itic
al
info
rmat
ion
, su
pp
lier
’s p
rese
nta
tio
n a
nd
co
mm
un
icat
ion
)
I
nte
rnet
Co
mp
any
D
A
war
enes
s ab
out
all
com
pet
ito
rs s
har
ing
th
e sa
me
sup
pli
er
O
n-t
ime-
del
iver
y f
or
dir
ect
com
pet
ito
rs
G
ranti
ng p
refe
ren
tial
tre
atm
ent
Ex
tern
al n
etw
ork
(su
pp
lier
’s p
rese
nta
tio
ns
and
co
mm
un
icat
ion
)
Inte
rnet
Co
mp
any
E
A
war
enes
s ab
out
mai
n c
om
pet
ito
rs s
har
ing
th
e sa
me
sup
pli
er
O
n-t
ime-
del
iver
y f
or
mai
n d
irec
t co
mp
etit
ors
E
xcl
usi
ve
agre
emen
ts o
f su
pp
lier
wit
h i
ts o
ther
cu
sto
mer
s
P
rice
est
imat
ion
of
purc
has
ed p
rod
uct
(d
irec
t co
mp
etit
ors
)
G
ranti
ng p
refe
ren
tial
tre
atm
ent
I
nte
rnal
net
wo
rk (
emp
loy
ees
pre
vio
usl
y e
mp
loy
ed a
t co
mp
etit
ors
,
emp
loy
ees
wh
ich
wo
rk(e
d)
tog
eth
er w
ith
su
pp
lier
/ c
om
pet
ito
rs)
E
xte
rnal
net
wo
rk (
sup
pli
er’s
pre
sen
tati
on
an
d c
om
mu
nic
atio
n,
trad
e fa
irs,
com
mu
nic
atio
n /
co
op
erat
ion
wit
h i
nd
irec
t co
mp
etit
ors
)
I
nte
rnet
P
rodu
ct a
nal
ysi
s
Co
mp
any
F
A
war
enes
s ab
out
all
com
pet
ito
rs s
har
ing
th
e sa
me
sup
pli
er
O
n-t
ime-
del
iver
y f
or
the
sup
pli
er’s
oth
er c
ust
om
ers
E
xcl
usi
ve
agre
emen
ts o
f su
pp
lier
wit
h i
ts o
ther
cu
sto
mer
s
I
nte
rnal
net
wo
rk (
emp
loy
ees
wh
ich
wo
rk(e
d)
tog
eth
er w
ith
su
pp
lier
/
com
pet
ito
rs)
Ex
tern
al n
etw
ork
(su
pp
lier
’s p
rese
nta
tio
ns
and
co
mm
un
icat
ion
, tr
ade
fair
s)
Co
mp
any
G
A
war
enes
s ab
out
all
com
pet
ito
rs s
har
ing
th
e sa
me
sup
pli
er
O
n-t
ime-
del
iver
y f
or
the
sup
pli
er’s
oth
er c
ust
om
ers
(dir
ect
com
pet
ito
rs)
E
xcl
usi
ve
agre
emen
ts o
f su
pp
lier
wit
h i
ts o
ther
cu
sto
mer
s (d
irec
t
com
pet
itors
)
G
ranti
ng p
refe
ren
tial
tre
atm
ent
E
xte
rnal
ag
ency
I
nte
rnal
net
wo
rk (
emp
loy
ees
pre
vio
usl
y e
mp
loy
ed a
t co
mp
etit
ors
,
emp
loy
ees
wh
ich
wo
rk(e
d)
tog
eth
er w
ith
su
pp
lier
/ c
om
pet
ito
rs)
E
xte
rnal
net
wo
rk (
op
enn
ess
on
th
e A
sian
mar
ket
wit
h t
his
kin
d o
f cr
itic
al
info
rmat
ion
by s
up
pli
er o
r co
mp
etit
or,
pro
xim
ity
of
sup
pli
ers
and
th
eir
cust
om
ers,
tra
de
fair
s)
I
nte
rnet
P
rodu
ct a
nal
ysi
s
27
Co
mp
any
H
A
war
enes
s ab
out
all
com
pet
ito
rs s
har
ing
th
e sa
me
sup
pli
er
O
n-t
ime-
del
iver
y f
or
the
sup
pli
er’s
oth
er c
ust
om
ers
(dir
ect
com
pet
ito
rs)
E
xcl
usi
ve
agre
emen
ts o
f su
pp
lier
wit
h i
ts o
ther
cu
sto
mer
s (d
irec
t
com
pet
itors
)
G
ranti
ng p
refe
ren
tial
tre
atm
ent
E
xte
rnal
net
wo
rk (
sup
pli
er’s
pre
sen
tati
on
an
d c
om
mu
nic
atio
n)
I
nte
rnet
P
rodu
ct a
nal
ysi
s
Co
mp
any
I
A
war
enes
s ab
out
all
dir
ect
com
pet
ito
rs,
wh
ich
are
glo
bal
pla
yer
s in
th
eir
indust
ry, sh
arin
g t
he
sam
e su
pp
lier
O
n-t
ime-
del
iver
y f
or
the
sup
pli
er’s
oth
er c
ust
om
ers
(dir
ect
com
pet
ito
rs)
E
xcl
usi
ve
agre
emen
ts o
f su
pp
lier
wit
h i
ts o
ther
cu
sto
mer
s
P
rice
est
imat
ion
of
purc
has
ed p
rod
uct
(d
irec
t co
mp
etit
ors
)
G
ranti
ng p
refe
ren
tial
tre
atm
ent
I
nte
rnal
net
wo
rk (
emp
loy
ees
pre
vio
usl
y e
mp
loy
ed a
t co
mp
etit
ors
,
emp
loy
ees
wh
ich
wo
rk(e
d)
tog
eth
er w
ith
su
pp
lier
/ c
om
pet
ito
rs)
E
xte
rnal
net
wo
rk (
sup
pli
er’s
pre
sen
tati
on
an
d c
om
mu
nic
atio
n,
trad
e fa
irs,
com
mu
nic
atio
n w
ith
su
b-b
ran
ds
of
corp
ora
te g
rou
p a
nd
co
mp
etit
ors
)
I
nte
rnet
Co
mp
any
J
A
war
enes
s ab
out
dir
ect
com
pet
ito
rs,
wh
ich
are
glo
bal
pla
yer
s in
th
eir
indust
ry, sh
arin
g t
he
sam
e su
pp
lier
O
n-t
ime-
del
iver
y f
or
the
sup
pli
er’s
oth
er c
ust
om
ers
(dir
ect
com
pet
ito
rs)
E
xcl
usi
ve
agre
emen
ts o
f su
pp
lier
wit
h i
ts o
ther
cu
sto
mer
s
P
rice
est
imat
ion
of
purc
has
ed p
rod
uct
(d
irec
t co
mp
etit
ors
)
G
ranti
ng p
refe
ren
tial
tre
atm
ent
I
nte
rnal
net
wo
rk (
emp
loy
ees
pre
vio
usl
y e
mp
loy
ed a
t co
mp
etit
ors
,
emp
loy
ees
wh
ich
wo
rk(e
d)
tog
eth
er w
ith
su
pp
lier
/ c
om
pet
ito
rs)
E
xte
rnal
net
wo
rk (
sup
pli
er’s
pre
sen
tati
on
an
d c
om
mu
nic
atio
n,
trad
e fa
irs,
com
mu
nic
atio
n w
ith
su
b-b
ran
ds
of
corp
ora
te g
rou
p a
nd
dir
ect
com
pet
ito
rs)
I
nte
rnet
P
rodu
ct a
nal
ysi
s
Tab
le 6
: K
ind o
f co
mpet
itor
inte
llig
ence
avai
lable
for
purc
has
ing d
ecis
ions
28
Some companies stated that ‘a good purchaser simply knows all there is to know about
competitors’ (Company E) or ‘a good purchaser just knows the competitive landscape with
regard to strategic suppliers’ (Company I). This is – according to some interviewees – mainly
due to the good internal and external network the purchaser has access to. This helps to be aware
of competitors sharing the same supplier and get soft facts about these competitors. Either the
suppliers themselves try to increase their own reputation and to be more attractive for potential
customers by referencing on important customers within corporate presentations (in the pre-
purchase phase) or customers (often indirect ones) have a good relationship and compare notes
with others. Competitors purchasing from the same supplier are often the own indicators for the
supplier’s product and service quality (Company C).
Interpretation
As proposed by literature (Auster & Choo, 1993; Bunn, 1993; Lester & Waters, 1989; Sheth,
1973), the companies interviewed scan the competitive landscape. The companies all state to
have access and to gather information about direct and indirect competitors. However, it cannot
be guaranteed that all of the supplier’s customers are covered and there might be ‘hidden’ ones
the focal company is not aware of in the decision making process.
Nevertheless, and in line with the conclusion of Bergen and Peteraf (2002), most companies
often consider their direct competitors in supply markets but neglect to monitor indirect ones.
This thesis’ results indicate that with regard to more detailed information especially larger
companies are not aware about indirect competitors and their standing with the supplier,
whereas smaller companies seem to have access to information about both. For smaller
companies, with strong personal ties to the supplier and mainly working in a close and intense
regional network, the fact that they know indirect competitors sharing the supplier seems
reasonable. As the supplier himself also mainly acts within this regional network and sells his
products within this network, all of his customers are also part of it. Open communication and
personal relationships within the network then leads to the exchange between direct and indirect
competitors about the respective supplier. In contrast, larger companies often are unable or
consider it as irrelevant to access information about indirect competitors. Even though being
aware of both, they only gather information about direct competitors with regard to specific
purchasing activities. Buyers may be aware about indirect competitors sharing the same
supplier, e.g. due to references in corporate presentations, however more detailed information is
difficult to access or is considered as less important (Company I and J). This perception
contradicts the recommendation in literature that considering competitor information in case of
high resource similarity but low market commonality is especially important (Bergen & Peteraf,
2002; Bromwich, 1990; Chen, 1996).
Specific findings
Worth mentioning is the finding that Company G, operating on the Asian market, is not only
aware of direct and indirect rivals, but also has access to more detailed information. As ‘copy
paradise’ (as stated by the participant), internal information will not be kept internal for long.
This facilitates a very thorough analysis of competitors. The fact, that Asian companies are less
concerned about privacy or confidentiality aspects, was supported by the behavior of the
interviewee from Company G. He provided detailed information about competitors and
29
suppliers, including names, whereas the interviewees from the German market only provided
anonymized information. This also implies that suppliers and competitors are less concerned
which kind of information should be made available for the buyers and which kind of
information should not. According to the interviewee competitors as well as suppliers are very
up-front and easily provide confidential information.
5.2 The role of competitor information in purchasing decision making
This section gives answers to research question 2 (‘What is the role of competitor
information in purchasing decision making?’). Table 7 summarizes the interviewees’ perception
about the role and effects of competitor intelligence considered in strategic purchasing
decisions, both indicated by meaningful citations from the interviewees.
General findings
Whereas some companies consider the role of competitor intelligence in strategic purchasing
decisions to be high, only one company considers the impact to be low and therefore barely
regards this type of information. The interviewee of Company J neglects to consider competitor
information – even though access to such information is available. Only in rare cases of
perceived inferiority to competitors, Company J feels impelled to actively consider competitor
intelligence. Having high purchasing volumes, Company J perceives to be preferred by every
supplier. Company I, part of the same group company as Company J, however, considers
competitor information to be essential especially for new suppliers the company does not have
previous experience with. Competitors then might be the only indications of the supplier’s
product and service quality. Additionally, the participant is interested in knowing his own
position compared to competitors as this is crucial in strategic purchasing decisions.
Nevertheless, Company I highlights that the use and influence of competitor intelligence on the
decision depends on an individual assessment per decision.
Company A considers the impact of competitor intelligence on a decision’s outcome to be
‘medium’ as their aim is to purchase from the regional network. ‘There are several criteria for
selecting suppliers, and besides others [their] competitors are of course considered as a threat in
terms of intellectual property rights. […] considering competitor information is quite important,
however, not the most important aspect’ (Company A). Company F, one major patent applicant
in Germany, often innovates in cooperation with suppliers. For deciding about joint innovation
projects they consider – besides others – competitor information. Knowing that global players
from several branches are being delivered by this supplier is viewed as a positive signal.
Nevertheless, the interviewee does not consider a decision based on competitor information to
be a better than one not relying on competitor information.
In total, six of the participants (Company B, C, D, E, G and H) allot high impact to
competitor intelligence in strategic purchasing decisions. Except of Company H, all other five
show annual revenue of less than € 5 billion per annum. ‘It depends on the kind of projects, the
kind of support from headquarter as well as the kind of capability we have; in general maybe
competitor intelligence has 25% of impact on the entire decision’ (Company G). All companies
are convinced that without considering this kind of information, decisions would come to a less
effective and efficient result and ‘… would definitively lead to a worse outcome’ (Company E).
30
Cas
e R
ole
of
com
pet
itor
inte
llig
ence
in
th
e p
urc
has
ing
dec
isio
n
Co
mp
etit
or
inte
llig
ence
’s i
mp
act
on
purc
has
ing
dec
isio
n’s
ou
tco
me1
Co
mp
any
A
‘
This
dep
end
s w
het
her
ther
e ar
e se
ver
al s
upp
lier
s av
aila
ble
in
ou
r re
gio
nal
net
work
, or
whet
her
ther
e is
on
ly o
ne
sup
pli
er w
ho
is
suit
able
fo
r o
ur
requir
emen
ts.
If t
her
e ar
e se
ver
al,
man
y f
acto
rs,
incl
ud
ing
the
supp
lier
’s
cust
om
er b
ase,
are
consi
der
ed f
or
the
fin
al s
elec
tio
n.
If t
her
e ex
ists
on
ly
on
e ap
pro
pri
ate
suppli
er, o
f co
urs
e w
e m
ust
ch
oo
se h
im,
as o
ur
aim
in
term
s o
f su
stai
nab
ilit
y i
s to
on
ly p
urc
has
e fr
om
th
e n
etw
ork
.’
‘
If w
e h
ave
the
cho
ice
bet
wee
n m
ore
th
an o
ne
supp
lier
th
e im
pac
t is
med
ium
. T
her
e ar
e se
ver
al c
rite
ria
for
sele
ctin
g s
up
pli
ers,
an
d b
esid
es
oth
ers,
ou
r co
mp
etit
ors
are
of
cou
rse
con
sider
ed a
s th
reat
in
ter
ms
of
inte
llec
tual
pro
per
ty r
igh
ts.
Th
us,
in
tho
se d
ecis
ion
s, c
on
sid
erin
g
com
pet
ito
r in
form
atio
n i
s q
uit
e im
po
rtan
t, h
ow
ever
no
t th
e m
ost
im
po
rtan
t
asp
ect.
’
‘
I ev
en t
hin
k t
hat
if
we
wou
ld c
on
sid
er t
his
kin
d o
f in
form
atio
n,
this
mig
ht
lead
to
wo
rse
cho
ices
, as
we
mig
ht
ten
d t
o c
ho
ose
a s
up
pli
er w
ho
is
no
t th
e
bes
t fo
r o
ur
req
uir
emen
ts.’
Co
mp
any
B
‘
Th
is i
nfo
rmat
ion i
s ver
y i
mp
ort
ant
for
us.
Bes
ide
fro
m c
on
sid
erin
g
finan
cial
asp
ects
and s
ourc
ing
con
dit
ion
s, t
he
sup
pli
er’s
pro
file
is
the
mo
st
impo
rtan
t in
fluen
ce f
acto
r. T
he
pro
file
con
sist
s o
f fo
ur
crit
eria
; o
ne
of
them
is
the
cust
om
er b
ase.
’
‘
If o
ur
key
com
pet
ito
rs a
re d
eliv
ered
by
th
is s
upp
lier
, w
e tr
y t
o a
vo
id
pu
rch
asin
g f
rom
him
. O
f co
urs
e th
is a
im i
s n
ot
alw
ays
feas
ible
.’
‘
In f
ew c
ases
, ev
en t
ho
ug
h t
he
supp
lier
mig
ht
no
t b
e co
nsi
der
ed a
s
pre
ferr
ed f
rom
us,
we
anyw
ay m
igh
t d
ecid
e to
pu
rch
ase
from
him
, as
dir
ect
com
pet
ito
rs a
lso
pu
rch
ase
from
th
is s
up
pli
er a
nd
th
is o
ften
is
a si
gn
of
hig
h
qu
alit
y.’
Co
mp
any
C
‘
In c
ase
of
join
t in
nov
atio
ns
we
sim
ply
sig
n a
ND
A …
on
ly i
n r
are
case
s
we
reje
ct t
he
dec
isio
n d
ue
to c
om
pet
ito
r in
form
atio
n.’
‘
If t
he
firs
t-ti
er-s
uppli
er d
eliv
ers
to a
ll d
irec
t co
mp
etit
ors
an
d t
her
e ar
e o
nly
few
of
them
on t
he
mar
ket
, th
en w
e d
o n
ot
con
sid
er t
his
in
form
atio
n.’
‘
In c
ase
of
pri
ce d
iffe
rence
s b
etw
een
bu
yer
s w
ith
th
is s
upp
lier
, w
e w
ou
ld
firs
tly d
iscu
ss t
his
topic
wit
h t
he
sup
pli
er a
nd t
hen
po
ten
tial
ly e
nd
th
e
rela
tion
ship
. W
e do n
ot
wan
t to
est
abli
sh d
um
pin
g p
rice
s b
ut
we
wan
t fa
ir
on
es,
appro
pri
ate
to t
he
glo
bal
mar
ket
pri
ces.
’
‘
If w
e le
arn t
hat
we
are
dec
eived
by
th
e su
pp
lier
(co
mp
ared
to
ou
r
com
pet
itors
), t
his
aff
ects
the
rela
tio
nsh
ip e
xtr
emel
y n
egat
ive.
In
fu
rth
er
stra
tegic
dec
isio
ns,
this
supp
lier
is
then
pu
t o
n t
he
so c
alle
d b
lack
lis
t an
d
neg
lect
ed o
r ev
en s
hut
dow
n…
if
his
beh
avio
r ch
ang
es d
ue
to o
ur
reac
tion
,
we
wil
l co
nsi
der
him
ag
ain
, o
ther
wis
e w
e w
ill
of
cou
rse
no
t p
urc
has
e fr
om
him
any
more
.’
‘
If t
he
supp
lier
’s o
ther
cu
stom
ers
are
situ
ated
in a
no
ther
in
du
stry
, su
ch a
s
auto
mo
tiv
e, t
han
th
is i
s a
po
siti
ve
sig
n f
or
qu
alit
y a
nd
tec
hn
ical
exp
erti
se.’
‘Ro
ug
hly
est
imat
ed i
n 9
0%
of
the
case
s w
ill
lead
to
th
e sa
me
dec
isio
n
wh
eth
er c
on
sider
ing
co
mp
etit
or
info
rmat
ion
or
no
t. T
he
oth
er 1
0%
are
case
s, i
n w
hic
h i
t is
con
sid
ered
as
po
siti
ve
or
neg
ativ
e if
dir
ect
com
pet
ito
rs
pu
rch
ase
fro
m t
he
sam
e su
pp
lier
.’
‘If
the
sup
pli
er i
s n
ew f
or
us,
th
e o
nly
ind
icat
ion
ab
ou
t se
rvic
e an
d p
rodu
ct
qu
alit
y c
an b
e d
eriv
ed f
rom
th
e in
form
atio
n a
bo
ut
com
pet
ito
rs w
hic
h a
re
del
iver
ed b
y t
his
sup
pli
er.
No
t co
nsi
der
ing
co
mp
etit
or
info
rmat
ion
(if
no
t
avai
lab
le)
this
in
crea
ses
the
risk
an
d u
nce
rtai
nty
fo
r u
s w
het
her
th
e su
pp
lier
is q
ual
ifie
d f
or
ou
r re
qu
irem
ents
.’
‘
To
con
clud
e, t
his
info
rmat
ion
oft
en h
elp
s to
co
me
to b
ette
r d
ecis
ion
s.’
Co
mp
any
D
‘
I co
nsi
der
the
role
of
this
typ
e o
f in
form
atio
n t
o b
e v
ery
hig
h. N
ot
know
ing w
hat
the
com
pet
ito
rs a
re d
oin
g i
s cr
itic
al w
ith
reg
ard
to
ou
r
supply
chai
n e
ffec
tiven
ess.
’
‘
Neg
lect
ing
th
is k
ind
of
info
rmat
ion
… w
ou
ld d
efin
itiv
ely l
ead
to a
les
s
eval
uat
ed a
nd
su
rely
wo
rse
dec
isio
n.’
‘
Co
mp
etit
or-
bas
ed d
ecis
ion
s h
elp
to
fin
d t
he
mo
st a
pp
rop
riat
e su
pp
lier
,
wh
ose
cu
sto
mer
bas
e d
oes
no
t im
po
se a
th
reat
to
us.
’
1 T
his
colu
mn i
ndic
ates
the
inte
rvie
wee
s‘ p
erce
pti
ons
about
the
impac
t on d
ecis
ion’s
outc
om
e w
hen
usi
ng c
om
pet
itor
intg
elli
gen
ce c
om
par
ed t
o d
ecis
ion’s
outc
om
e not
usi
ng c
om
pet
itor
inte
llig
ence
in t
he
dec
isio
n m
akin
g p
roce
ss;
i.e.
mea
nin
g t
hat
the
outc
om
e is
bet
ter
in d
ecis
ions
bas
ed o
n c
om
pet
itor
info
rmat
ion.
31
‘Our
scori
ng m
etho
d i
ncl
ud
ed c
om
pet
ito
r in
form
atio
n a
s o
ne
asp
ect.
We
eval
uat
e our
suppli
ers
acco
rdin
g t
o t
hei
r co
op
erat
ion
wit
h [
dir
ect]
com
pet
itors
. If
ther
e ar
e to
o m
any
work
ing w
ith
th
is s
up
pli
er, w
e tr
y t
o
find a
no
ther
one.
Als
o s
ign
ed N
DA
of
the
sup
pli
er w
ith
com
pet
ito
rs a
re
stri
ctly
con
sider
ed.
In t
he
sco
rin
g m
eth
od
, b
oth
fac
ts w
ill
lead
to
dra
wbac
ks
in t
he
score
.’
‘Th
is k
ind
of
info
rmat
ion
is
alw
ays
dis
cuss
ed a
nd
con
sid
ered
. N
ot
reg
ard
ing
co
mp
etit
or
info
rmat
ion
wo
uld
lea
d t
o a
no
ther
res
ult
fo
r th
e
dec
isio
n a
s th
is i
s o
ne
com
po
nen
t o
f th
e d
ecis
ion
.’
Co
mp
any
E
‘
I th
ink,
com
pet
itor
info
rmat
ion
is
qu
ite
imp
ort
ant
in d
ecis
ion
mak
ing
pro
cess
es.
This
is
also
anch
ore
d i
n o
ur
pu
rchas
ing
gu
idel
ines
.’
‘
In a
ll k
inds
of
stra
tegic
pu
rch
asin
g d
ecis
ion
s, t
he
sup
pli
er p
rofi
le,
wh
ich
consi
der
s th
is i
nfo
rmat
ion
, d
epen
ds
on
min
imu
m r
equ
irem
ents
for
each
aspec
t. I
f th
ey a
re n
ot
met
, th
e d
ecis
ion
is
reje
cted
. T
his
als
o a
cco
un
ts f
or
com
pet
itor
info
rmat
ion
. If
th
ere
are
too
man
y g
lob
al p
layer
s o
r w
e k
no
w
that
ther
e is
one
wit
h e
spec
iall
y h
igh
pu
rch
ase
vo
lum
es o
r o
ne
who
has
sign
ed s
ever
al N
DA
wit
h t
he
sup
pli
er, w
e d
o n
ot
con
sid
er h
im a
ny
mo
re.’
‘
If w
e w
ou
ld n
ot
con
sid
er c
om
pet
ito
r in
form
atio
n,
this
wo
uld
def
init
ivel
y
lead
to
a w
ors
e o
utc
om
e.’
‘
By
kn
ow
ing
wh
at o
ur
com
pet
ito
rs a
re d
oin
g a
nd
how
th
eir
rela
tion
ship
to t
he
sup
pli
er i
s, w
e ca
n s
tren
gth
en o
ur
po
siti
on
in
co
ntr
act
neg
oti
atio
ns.
’
Co
mp
any
F
‘
In j
oin
t in
novat
ion
pro
ject
s w
ith
th
e su
pp
lier
a t
ho
roug
h a
nal
ysi
s of
his
bu
sines
s en
vir
on
men
t is
nec
essa
ry…
In
tho
se d
ecis
ion
s co
mp
etit
or
info
rmat
ion
is
consi
der
ed. T
he
mai
n f
acto
rs i
nfl
uen
cing
th
e d
ecis
ion
are
the
finan
cial
str
uct
ure
, ri
sk e
val
uat
ion
, th
e su
pp
lier
’s c
apab
ilit
y a
nd
wil
ling
nes
s an
d t
o r
educe
th
e su
pp
lier
bas
e.’
‘
Of
cours
e, t
he
cust
om
ers
of
this
su
pp
lier
are
co
nsi
der
ed w
ith
in d
ecis
ion
,
bu
t ar
e not
one
of
the
mai
n a
spec
ts.’
‘
As
all
join
t in
novat
ion p
roje
cts
are
pro
tect
ed w
ith
ND
A, th
e fa
ct t
hat
com
pet
itors
are
als
o w
ork
ing
wit
h t
his
su
pp
lier
is
goo
d t
o k
no
w b
ut
do
es
no
t re
ally
chan
ge
the
final
dec
isio
n.’
‘
ND
As
cov
er t
he
join
t in
no
vat
ion
pro
ject
s, s
o w
hy
co
nsi
der
co
mp
etit
ors
if t
his
on
e is
the
mo
st s
uit
able
su
pp
lier
. F
inal
ly,
oth
er f
acto
rs a
re m
ore
imp
ort
ant
and
th
ey a
re t
he
on
ly o
ne
infl
uen
cin
g t
he
dec
isio
n.’
‘
As
oth
er f
acto
rs a
re m
ore
im
po
rtan
t, I
do
ubt
that
mo
re r
elyin
g o
n
com
pet
ito
r in
form
atio
n w
ou
ld l
ead t
o a
bet
ter
dec
isio
n.’
‘How
ever
, o
f co
urs
e k
no
win
g t
hat
co
mp
etit
ors
wo
rk t
og
eth
er w
ith t
his
sup
pli
er m
igh
t al
so b
e a
sig
n o
f q
ual
ity.’
Co
mp
any
G
‘
It d
epen
ds
on t
he
kin
d o
f p
roje
cts,
th
e k
ind
of
supp
ort
fro
m h
ead
qu
arte
r
as w
ell
as t
he
kin
d o
f ca
pab
ilit
y w
e h
ave;
in
gen
eral
may
be
com
pet
ito
r
inte
llig
ence
has
25%
of
imp
act
on
th
e en
tire
dec
isio
n.’
‘
In k
ey s
trat
egic
pro
ject
s w
e ta
ke
com
pet
ito
r in
form
atio
n a
s a
mu
st t
o
consi
der
.’
‘
It i
s ver
y i
mpo
rtan
t fo
r al
l th
e k
ey p
roje
cts.
’
‘
Th
is d
efin
itiv
ely l
ead
s to
a b
ette
r o
utc
om
e th
an i
n d
ecis
ions
no
t
con
sid
erin
g c
om
pet
ito
r in
form
atio
n.’
Co
mp
any
H
‘
Th
e m
ost
im
po
rtan
t cr
iter
ia i
s th
e su
pp
lier
’s p
rofi
le a
nd
if
he
is a
ble
to
mee
t o
ur
requ
irem
ents
an
d t
he
risk
s ar
e lo
w.
Th
en w
e h
ave
to s
cree
n
wh
ether
the
suppli
er i
s one
ou
t of
man
y o
r w
het
her
we
hav
e th
e
po
ssib
ilit
y t
o a
vo
id p
urc
has
ing
fro
m h
im…
. B
ut
for
supp
lier
dev
elo
pm
ent
or
earl
y s
uppli
er i
nvolv
emen
t (E
SI)
we
on
ly c
on
sid
er s
up
pli
ers
wh
o d
o
no
t del
iver
to o
ur
com
pet
ito
rs.’
‘In t
he
purc
has
ing g
uid
elin
es a
t h
and
, th
e co
nsi
der
atio
n o
f co
mp
etit
or
info
rmat
ion
wit
hin
the
risk
man
agem
ent
is n
eces
sary
.’
‘
Kn
ow
ing
oth
er c
ust
om
ers
of
the
sup
pli
er,
them
selv
es g
lob
al p
layer
s in
thei
r in
du
stry
wo
uld
ju
st i
nte
nsi
fy o
ur
inte
rest
in
th
e su
pp
lier
. B
ut
this
wo
uld
no
t d
irec
tly a
ffec
t th
at w
e ar
e p
urc
has
ing
fro
m h
im.’
‘
Su
pp
lier
s h
avin
g a
hig
hly
co
mp
etit
ive
cust
om
er b
ase
fro
m o
ur
per
spec
tiv
e ar
e n
ot
con
sid
ered
to
be
po
ten
tial
par
tner
fo
r su
pp
lier
dev
elo
pm
ent
or
ES
I.’
32
‘If
e.g. 5%
of
the
suppli
er’s
rev
enu
e is
co
min
g f
rom
us,
wher
eas
80
% i
s
gen
erat
ed b
y a
ctiv
itie
s w
ith o
ne
com
pet
ito
r, w
e sh
ou
ld a
sk o
urs
elv
es i
f
this
is
an a
ppro
pri
ate
stra
teg
ic s
up
pli
er.’
Co
mp
any
I
‘
Our
stra
tegy p
aper
incl
udes
all
acc
essi
ble
info
rmat
ion
ab
ou
t co
mp
etit
ors
shar
ing o
ur
suppli
er f
or
stra
teg
ic c
om
po
nen
ts.’
‘
In c
ase
of
capac
ity b
ott
len
eck
s, i
t is
ess
enti
al t
o k
no
w w
het
her
we
are
a
stra
tegic
cust
om
er o
r not.
If
a b
oo
st o
f ec
on
om
y f
or
bo
th, th
e su
pp
lier
and
our
com
pet
itor
is f
ore
cast
ed t
his
info
rmat
ion
is
crit
ical
. If
we
are
no
t bu
t
a co
mpet
itor
is a
str
ateg
ic p
artn
er,
then
we
sho
uld
aim
at
fin
din
g a
no
ther
suppli
er.’
‘
Wit
h r
egar
d t
o n
ew s
uppli
ers
crit
eria
reg
ard
ing
th
e co
mp
etit
ors
bei
ng
del
iver
ed b
y t
his
supp
lier
are
mo
re i
mp
ort
ant
than
in
dec
isio
ns
abo
ut
suppli
ers
we
alre
ady a
re e
xp
erie
nce
d w
ith
.’
‘
It i
s ver
y i
mpo
rtan
t to
know
ho
w t
he
sup
pli
er p
erce
ives
an
d e
val
uat
es u
s
and h
is o
ther
cust
om
ers.
’
‘
Th
is o
ver
vie
w o
n o
ur
com
pet
ito
rs’
supp
lier
s, g
ives
us
the
op
po
rtu
nit
y t
o
find
new
supp
lier
s, w
e d
idn
’t k
no
w u
nti
l n
ow
. P
erh
aps
he
mig
ht
be
ver
y
go
od
fo
r o
ur
req
uir
emen
ts,
thu
s th
e co
mp
etit
or
anal
ysi
s h
elp
fin
d a
bet
ter
and
mo
re a
pp
rop
riat
e su
pp
lier
… i
f th
is n
ew s
up
pli
er o
ffer
s b
enef
its
to u
s
du
e to
th
e fa
ct t
hat
he
is a
lso d
eliv
erin
g t
o c
om
pet
ito
rs,
this
co
mp
etit
or
info
rmat
ion
is
cru
cial
an
d p
osi
tiv
ely a
ffec
ts t
he
dec
isio
n.’
‘
If w
e h
ow
ever
kn
ow
th
at a
co
mp
etit
or
has
hig
h p
urc
has
ing
vo
lum
es w
ith
a su
pp
lier
, th
is m
igh
t le
ad t
o r
ejec
t th
e d
ecis
ion
to
co
op
erat
e w
ith
him
.’
‘
Th
us,
kn
ow
ing
ou
r po
siti
on
co
mp
ared
to
co
mp
etit
ors
fro
m t
he
supp
lier
’s
per
spec
tiv
e is
ess
enti
al f
or
all
kin
ds
of
stra
teg
ic p
urc
has
es.’
‘
Th
e in
flu
ence
dep
end
s o
n t
he
typ
e o
f st
rate
gic
dec
isio
ns.
On
e ca
nn
ot
gen
eral
ize
this
. T
her
e m
igh
t be
dec
isio
ns,
in
wh
ich
th
is i
nfo
rmat
ion
is
imp
ort
ant
and
th
ere
mig
ht
be
dec
isio
ns
in w
hic
h w
e to
tall
y n
egle
ct t
his
info
rmat
ion
.’
Co
mp
any
J
‘
As
we
are
inte
rest
ed t
hat
th
e su
pp
lier
su
rviv
es,
it i
s g
oo
d i
f th
e su
pp
lier
also
has
oth
er b
ig O
EM
s pu
rch
asin
g f
rom
him
. T
hu
s, i
t is
im
po
rtan
t th
at
the
suppli
er h
as n
ot
on
ly o
ur
gro
up
co
mp
any a
s cu
sto
mer
.’
‘
We,
as
par
t of
the
gro
up c
om
pan
y, ar
e n
ot
afra
id o
f th
e su
pp
lier
s’ o
ther
cust
om
ers.
’
‘
For
suppli
er s
elec
tion
, only
th
e ca
pit
al s
tru
ctu
re o
f th
e su
pp
lier
is
impo
rtan
t.’
‘
Info
rmat
ion
about
com
pet
ito
rs s
har
ing
th
e sa
me
sup
pli
er a
re v
ery
infe
rior,
at
the
end o
f th
e d
ay t
he
fin
anci
al r
atin
gs,
qu
alit
y a
nd
on
-tim
e-
del
iver
y a
spec
ts a
re h
ighly
im
po
rtan
t… I
nfo
rmat
ion
ab
ou
t co
mp
etit
ors
purc
has
ing f
rom
this
supp
lier
are
in
so
me
resp
ect
con
sid
ered
in t
he
finan
cial
rat
ing…
.but
final
ly o
nly
th
e p
rice
co
un
ts.’
‘If
we
per
ceiv
e b
eing i
nfe
rior
fro
m t
he
per
spec
tiv
e o
f th
e su
pp
lier
com
par
ed t
o o
ther
cust
om
ers,
we
try
to
eli
min
ate
and
rep
lace
th
is
suppli
er.’
‘
Wh
en a
gre
eing o
n E
SI
we
con
sid
er c
om
pet
ito
r in
tell
igen
ce t
o s
om
e
exte
nt.
In t
his
co
nte
xt,
oth
er c
ust
om
ers
of
this
su
pp
lier
are
co
nsi
der
ed a
s
refe
ren
ce f
or
qual
ity i
n t
erm
s o
f p
rodu
ct a
nd
beh
avio
r.’
‘
Nea
rly n
o i
mp
act
of
com
pet
ito
r in
tell
igen
ce o
n t
he
dec
isio
ns’
ou
tco
mes
.’
‘
Th
e m
ain
in
flu
enci
ng
fac
tors
on
th
e d
ecis
ion
s o
utc
om
e ar
e th
us
pri
ces,
tota
l co
st o
f o
wn
ersh
ip, q
ual
ity
as
wel
l as
ad
her
ence
to
del
iver
y d
ates
.’
‘
Low
, bu
t on
ly p
osi
tiv
e im
pac
t in
cas
e o
f E
SI.
’
‘
Ho
wev
er,
if w
e g
et t
o k
no
w t
hat
a c
om
pet
ito
r is
pre
ferr
ed b
y t
he
sup
pli
er, w
e d
irec
tly
try
to
eli
min
ate
this
su
pp
lier
.’
Tab
le 7
: P
erce
ived
im
po
rtan
ce o
f th
e ro
le o
f co
mpet
itor
inte
llig
ence
in s
trat
egic
purc
has
ing d
ecis
ions
33
However, Company C states that ‘roughly estimated, in 90% of the cases it will lead to the
same decision whether considering competitor information or not’. Nevertheless, if Company C
finds out that they ‘are deceived by the supplier (compared to [their] competitors), the effect on
the joint relationship would be devastating. In further strategic decisions, this supplier is then
put on the so called black list and neglected or even shut down’. This perception is shared by
Company B stating that ‘if [their] key competitors are delivered by this supplier, [they] try to
avoid purchasing from him.’
Interpretation
In line with the results of Day and Nedungadi (1994, p. 36), the interviews show that even
though companies are aware of the importance of external environmental scanning, not all
companies focus on competitor-oriented information within purchasing decisions to the same
extent. This might result from applying informal and unsystematic approaches leading to
problems of integrating the environmental scanning in SDM (see also Auster & Choo, 1993).
Whereas some companies explicitly state that scoring methods are applied during the decision
making process, including minimum requirements for all aspects, others seem to randomly
apply the criteria and set requirements tailored to specific situations. This is in line with Bunn
(1993) who results that decisions with high uncertainty often do not follow existing procedures
but are aligned to the specific requirements.
Competitor intelligence within these companies seems to be focused on direct competitors
and less on indirect ones; supporting the findings by Bergen and Peteraf (2002) about companies
neglecting to monitor competitors in supply markets. This contradicts the notion by Day and
Nedungadi (1994, pp. 34, 41) accentuating the importance of comparisons of resource
commitments, capabilities and value chains for companies in factor markets with strong
competitors. In this context Company C mentions that a separation of direct and indirect
competitors is required. A supplier especially delivering to the automotive industry (most of
their suppliers also deliver high volumes to this industry) is in general considered a sign of high
quality. This mainly results from the fact that automotive OEMs ask their suppliers to be
conform to the ISO technical specification ISO/TS 1694913
. Company C therefore assumes that
this supplier is experienced in producing for quality-oriented OEMs and that this supplier is
aware of the importance of delivering high-quality products. Otherwise, competitors would not
buy from this supplier. However, this information only slightly affects the final outcome of the
purchasing decision. Information about direct competitors on the contrary, may highly affect the
decision according to the interviewees. This contradicts the assumption that especially with
regard to factor market rivalry a complex, multidimensional picture of all points of dominance
or inferiority compared to buyers sharing the same supplier is essential (Day & Nedungadi,
1994, p. 32).
Specific findings
Surprisingly, and contrary to the expectations based on literature, the impact of competitor
intelligence on the decisions’ outcome can either be positive or negative. This results from the
fact that competitors sharing the same supplier are generally considered as both, an opportunity
13 The technical specification of ISO/TS 1694913 aims at the development of a quality management system that provides
continuous improvement by emphasizing on defect prevention and the reduction of variation and waste in the supply chain.
34
and a threat. On the one hand, the supplier is experienced and respectively knows quality
standards or special requirements facilitating the collaboration with the supplier. Thus
competitors purchasing from the same supplier are a sign of high quality (and the decisions is
made in favor for the supplier). On the other hand, in terms of intellectual property rights and
the transfer of critical data or innovations, direct competitors are highly considered as threat.
Similar to this perception, Company H considers competitors sharing the same supplier as the
chance to access new innovations and perhaps profit from small prices and vice versa.
For Company B, D and E especially larger companies with high purchasing volumes with the
same supplier pose a great threat. ‘If there are too many global players or [the focal company]
know[s] that there is one with especially high purchase volumes or one who has signed several
NDAs with the supplier, [they] do not consider [this specific supplier] anymore’ (Company E).
These competitors will inevitably have higher and more constant purchasing volumes and are
assumed to receive automatically preferential treatment from the respective supplier. Therefore,
Company B, D and E are likely to decide against a supplier if one of his other customers has a
purchasing share with this supplier extremely exceeding the own one (e.g. 5% of the supplier’s
revenue coming from the focal company whereas 80% are generated by activities with a
competitor).
This perception is in line with the perception of Company J who in contrary states that having
high purchasing volumes make them automatically receive preferential treatment. Being both
part of a group company, Company I and J are able to consolidate purchasing activities and
generate high purchasing volumes. Hence, Company J reasons that having high purchasing
volume automatically leads to preferential treatment by suppliers as most suppliers consider
them to be a strategic account. Company I confines that they aim at being preferred over
competitors, which is facilitated by being part of the group company. This leads to high and
constant purchasing volume with one supplier who then is able to generate a constant flow of
revenue and a good reputation. Therefore, Company J states ‘it’s all about money and prices’.
With regard to innovation collaborations, competitor intelligence is intentionally neglected as
shared innovations are always protected via NDA. Even though it is in general considered as a
sign of quality if the supplier delivers to competitors, Company J rarely considers competitors
sharing the same supplier as this information is ‘in some respect considered in the financial
rating’ of the customer. This statement is limited insofar, as the participant states that in the case
the company gets informed about a supplier preferring another of his customers in terms of
delivery or prices, this will directly affect all purchasing activities. This case, however, is –
according to the interviewee – very unlikely to happen due to the very good reputation and
standing of the group company. Contrary, Company I highlights the importance of knowing the
company’s position compared to competitors from the supplier’s perspective in terms of
strategic purchasing decisions. This is particularly essential for new suppliers Company I does
not have previous experience with. As both companies are part of the same group company the
different perceptions about the role and the impact of competitor intelligence on purchasing
decisions are surprising. Even though applying similar tactics for decision making and using
similar information, they perceive the importance of competitor intelligence completely
different.
35
5.3 Influence on the suppliers‘ resource allocation
Finally, these previously gained insights help understand the subsequently presented findings
regarding research question 3 (‚How can the use of competitor information throughout the
purchasing decision process influence suppliers’ resource allocation?’). The main findings from
the interviews (see Table 8) are briefly summarized and then interpreted.
General findings
With respect to the supplier-buyer relationship, most companies do not expect an impact by
applying competitor intelligence. ‘Solely the fact of thoroughly analyzing his customer base
does not strengthen the ties between both partners’ (Company D). This statement is supported
by several other companies, assuming that the relationship is either influenced by the contract
between the partners or by a close and long-term, personal relationship, but not solely by
considering competitor intelligence. Suppliers may even not be aware of whether a decision is
made on the basis of competitor intelligence (Company E). Furthermore, both of the partners are
‘only concerned about making revenue’ (Company J) but disregard the relational component of
cooperating.
Contrary, few companies assume that competitor information positively affects the
relationship. Company B states that if a supplier is aware about the focal company including
competitor information in their decisions the supplier ‘perceives [Company B] to be very
interested in him and that [Company B] will grant him the status of a ‘strategic supplier’’. The
supplier’s effort to receive this status then leads to an improved buyer-supplier relationship.
Similarly, the participant from Company F thinks that competitor intelligence ‘makes the
supplier be aware about [the company’s] importance’. The interviewee emphasizes that for a
supplier who was chosen for the first time, a profound knowledge of the competitor base might
lead to the effort of the buying company to develop the new partner towards a strategic one.
Even though competitor intelligence’s impact on the buyer-supplier relationship is rarely
supported, its impact on resource allocation and on competitive advantage is widely accepted.
By strengthening the own position with the support of competitor information, Company C
assumes this helps to become a strategic customer ultimately leading to better resource
allocation. A better allocation of resources results from the buyer’s and vendor’s positioning in
the contract negotiations. Knowing more details about the supplier, including the entire
customer base, enables companies to have stronger arguments in negotiations (Company E and
G). Company C also accentuates the access to high-quality products in cases where they share
the supplier with competitors. Company H, having a high purchasing volume, rejects that
decisions which are based on competitor intelligence will result in a better allocation of external
resources. However, the interviewee mentions, that this might be different in the case of a focal
firm’s inferiority compared to another buying firm. This is in line with the statement from
Company E that important competitors purchasing from the same supplier and innovating with
him are considered as an opportunity to access joint innovations from the supplier and the
competitor. Furthermore, choosing a supplier who also delivers to competitors, positively affects
the access to resources for Company I, even though they accept not directly being a strategic or
preferred buyer. A supplier who has important and innovative customers must also be
innovative in order to maintain this relationship. Thereby, all buying companies have access to
innovations and to lower costs due to higher purchasing volumes.
36
Cas
e C
om
pet
itor
inte
llig
ence
’s i
nfl
uen
ce o
n b
uy
er-
suppli
er r
elat
ion
ship
Co
mp
etit
or
inte
llig
ence
’s i
mp
act
on
res
ou
rce
allo
cati
on
Co
mp
etit
or
inte
llig
ence
’s i
mp
act
on
bu
yer
’s
com
pet
itiv
e ad
van
tag
e
Co
mp
any
A
‘
As
stat
ed p
revio
usl
y,
com
pet
ito
r in
form
atio
n
affe
cts
the
dec
isio
n’s
ou
tcom
e to
so
me
exte
nt
bu
t is
not
the
most
im
po
rtan
t fa
cto
r. H
ow
ever
,
the
buyer
-suppli
er r
elat
ion
ship
is
no
t af
fect
ed
by a
pply
ing t
his
kin
d o
f in
form
atio
n.’
‘
If w
e sh
are
a su
pp
lier
wit
h o
ur
com
pet
ito
rs
and
we
kno
w h
ow
th
ese
cust
om
ers
are
trea
ted
by
th
e su
pp
lier
, w
e ca
n o
f co
urs
e st
reng
then
ou
r po
siti
on
fro
m t
he
sup
pli
er’s
per
spec
tiv
e.
Th
is m
igh
t al
so h
elp
us,
to
bec
om
e a
stra
teg
ic
cust
om
er w
hic
h m
ean
s th
at w
e h
ave
bet
ter
acce
ss t
o t
he
sup
pli
er’s
res
ourc
es.’
‘
Bec
om
ing
a s
trat
egic
su
pp
lier
an
d a
cces
sin
g
bet
ter
reso
urc
es,
then
in
th
e en
d t
his
als
o l
ead
s
to c
om
pet
itiv
e ad
van
tag
e.’
‘
Tra
nsa
ctio
n c
ost
s m
igh
t b
e re
du
ced
an
d w
e
may
hav
e fa
ster
del
iver
y t
imes
.’
‘
Ov
eral
l, t
he
enti
re p
urc
has
ing
str
ateg
y l
eads
to
com
pet
itiv
e ad
van
tag
e, n
ot
sole
ly t
he
fact
of
con
sid
erin
g c
om
pet
ito
r in
form
atio
n.’
Co
mp
any
B
‘
If w
e co
nsi
der
com
pet
itor
info
rmat
ion
, th
e
suppli
er w
ill
sure
ly n
oti
ce t
his
. T
hen
he
per
ceiv
es u
s to
be
ver
y i
nte
rest
ed i
n h
im a
nd
that
we
wil
l gra
nt
him
the
stat
us
of
a ‘s
trat
egic
suppli
er’.
Then
of
cours
e h
e al
so t
ries
to
fav
or
us
in o
rder
to g
et t
his
sta
tus.
’
‘
Res
ult
ing f
rom
that
, both
, th
e su
pp
lier
and
we,
aim
at
esta
bli
shin
g a
clo
se a
nd
per
son
al a
s w
ell
as l
ong
-las
ting r
elat
ion
ship
.’
‘
Know
ing t
he
ow
n p
osi
tion
an
d t
he
po
siti
on
s
of
the
com
pet
ito
rs,
we
are
able
to
infl
uen
ce t
he
suppli
er i
n o
rder
to i
ncr
ease
his
sat
isfa
ctio
n
wit
h u
s. T
his
mig
ht
affe
ct t
he
wil
lin
gn
ess
for
cooper
atio
n.’
‘
Th
is f
avo
rab
le t
reat
men
t [b
y t
he
sup
pli
er
aim
ing
at
bei
ng
on
e o
f o
ur
stra
teg
ic p
artn
ers]
then
po
siti
vel
y a
ffec
ts t
he
reso
urc
e
allo
cati
on
…’
‘
… a
nd
fin
ally
th
is f
ost
ers
of
cou
rse
com
pet
itiv
e ad
van
tag
e. H
ow
ever
, th
is e
ffec
t
mig
ht
be
rest
rict
ed,
as t
her
e ar
e fo
r su
re o
ther
asp
ects
res
ult
ing
fro
m p
urc
has
ing
act
ivit
ies,
wh
ich
infl
uen
ce o
ur
com
pet
itiv
e ad
van
tage.
’
‘
Th
is m
ay b
e p
rici
ng
asp
ects
, fa
st d
eliv
ery
an
d
spec
ial
agre
emen
ts w
ith
th
e su
pp
lier
.’
‘
Ear
lier
acc
ess
to i
nn
ov
atio
ns
I w
ou
ld a
lso
hig
hly
co
nsi
der
as
on
e o
f th
e ad
van
tag
es
resu
ltin
g f
rom
a s
upp
lier
who
wan
ts t
o b
e o
ur
stra
teg
ic p
artn
er.’
Co
mp
any
C
‘
We
def
init
ivel
y a
im a
t bei
ng
a p
refe
rred
cust
om
er,
how
ever
ther
e ar
e n
o s
pec
ific
mea
sure
s to
ach
ieve
this
po
siti
on
… b
y h
avin
g
low
purc
has
ing v
olu
me,
this
is
of
cou
rse
ver
y
dif
ficu
lt f
or
us.
’
‘
Consi
der
ing c
om
pet
itor
info
rmat
ion
mig
ht
hel
p a
chie
ve
this
aim
.’
‘
Th
is i
nfo
rmat
ion
oft
en h
elp
s to
co
me
to b
ette
r
dec
isio
ns
and
th
us
also
lea
ds
to c
om
pet
itiv
e
adv
anta
ge
by
bet
ter
allo
cati
on
of
reso
urc
es.’
‘
Esp
ecia
lly w
hen
pu
rch
asin
g f
rom
a s
up
pli
er
wh
ose
oth
er c
ust
om
ers
are
auto
mo
tiv
e O
EM
s,
then
we
can
acc
ess
pro
du
cts
wit
h h
igher
qu
alit
y.’
‘
Th
is i
nfo
rmat
ion
hel
ps
to h
ave
a b
ette
r
stan
din
g i
n c
ontr
act
neg
oti
atio
ns.
’
‘
Ad
van
tag
es a
re e
spec
iall
y t
he
qu
alit
y o
f
pro
du
cts
and
pro
cess
ing
of
the
pu
rch
ase,
as
wel
l as
pri
ce a
nd
to
tal
cost
of
ow
ner
ship
.’
‘
In c
ase
of
new
su
pp
lier
s fo
r w
hic
h n
o
com
pet
ito
r in
form
atio
n w
as a
vai
lab
le,
ther
e is
hig
h r
isk
th
at t
he
coll
abo
rati
on
fai
ls.
Th
us
con
sid
erin
g t
his
in
form
atio
n m
ay r
edu
ce
tran
sact
ion
co
sts
and
co
sts
resu
ltin
g f
rom
inv
estm
ents
in
a n
ot
app
rop
riat
e su
pp
lier
.’
37
Co
mp
any
D
‘
Sole
ly t
he
fact
of
thoro
ughly
an
alyzi
ng
th
e
suppli
er’s
cust
om
er b
ase
do
es n
ot
stre
ng
then
the
ties
bet
wee
n b
oth
par
tner
s.’
‘
Per
hap
s if
th
e su
pp
lier
bec
om
es a
war
e o
f th
is
tho
rou
gh a
nal
ysi
s, h
e m
igh
t ai
m a
t im
pro
vin
g
som
e co
nd
itio
ns
such
as
del
iver
y t
imes
or
per
son
nel
he
pro
vid
es t
o u
s.’
‘
Of
cou
rse
we
can
der
ive
com
pet
itiv
e
adv
anta
ge
ou
t o
f th
ese
com
pet
ito
r-b
ased
dec
isio
ns.
If
the
supp
lier
curr
entl
y d
oes
no
t h
as
sig
ned
ND
As
or
earl
y s
up
pli
er i
nv
olv
emen
t
pro
gra
ms,
we
hav
e th
e ch
ance
to
do
so
an
d t
o
acce
ss h
is i
dea
s.’
‘
Ad
dit
ion
ally
th
is m
igh
t in
flu
ence
th
e p
rice
neg
oti
atio
ns.
’
Co
mp
any
E
‘
I don’t
thin
k,
that
a s
uppli
er i
s ev
en a
war
e
wh
ether
we
apply
co
mpet
ito
r in
form
atio
n i
n
our
dec
isio
n m
akin
g p
roce
sses
.’
‘
How
ever
, w
e ar
e ab
le t
o u
nco
nsc
iou
sly
infl
uen
ce t
he
rela
tion
ship
by
to
uch
ing
the
suppli
er’s
wea
k p
oin
ts i
n t
erm
s o
f h
is
cust
om
ers.
Bes
ides
str
ength
enin
g o
ur
po
siti
on
in n
egoti
atio
ns
he
wil
l re
aliz
e h
ow
im
po
rtan
t
we
are
for
him
and t
his
posi
tiv
ely i
nfl
uen
ces
our
per
sonal
rel
atio
nsh
ip.’
‘
As
ou
r po
siti
on
in t
he
con
trac
t n
ego
tiat
ion
s is
fost
ered
by
kno
win
g m
ore
det
ails
ab
ou
t th
is
sup
pli
er i
ncl
ud
ing
his
oth
er c
ust
om
ers,
I e
xp
ect
to r
ecei
ve
bet
ter
reso
urc
e al
loca
tio
n t
han
no
t
con
sid
erin
g t
his
typ
e o
f in
form
atio
n.’
‘
Th
is o
f co
urs
e th
en e
nab
les
us
to g
ain
com
pet
itiv
e ad
van
tag
e o
ver
co
mp
etit
ors
. F
or
exam
ple
, a
com
pet
ito
r sh
arin
g t
he
sup
pli
er
wit
h u
s, w
ho
wil
l n
ot
use
co
mp
etit
or
info
rmat
ion
, th
en h
as l
ess
pow
er i
n c
on
trac
t
neg
oti
atio
ns.
’
‘
I w
ou
ld e
spec
iall
y e
xp
ect
to h
ave
low
er
pu
rch
asin
g p
rice
s.’
‘
So
met
imes
, h
ow
ever
, it
is
ver
y g
oo
d t
o h
ave
a
com
pet
ito
r p
urc
has
ing
fro
m y
ou
r su
pp
lier
.
Ev
en t
ho
ug
h m
ost
in
no
vat
ion
s ar
e p
rote
cted
by
ND
As,
it
mig
ht
be
po
ssib
le t
o i
nfo
rmal
ly
acce
ss t
hes
e in
no
vat
ion
s.’
Co
mp
any
F
‘
App
lyin
g c
om
pet
itor
info
rmat
ion
fo
r th
e
stra
tegic
dec
isio
n m
akes
th
e su
pp
lier
to
bec
om
e aw
are
about
our
imp
ort
ance
.’
‘
A s
uppli
er, w
ith w
hom
we
wo
rk t
og
eth
er f
or
the
firs
t ti
me,
mig
ht
be
dev
elo
ped
to
war
ds
a
pre
ferr
ed s
uppli
er,
if w
e hav
e a
go
od
know
ledge
about
the
oth
er c
ust
om
ers
of
this
suppli
er.’
‘
Reg
ard
ing
th
e d
ecis
ion
fo
r E
SI
men
tio
ned
earl
ier,
a t
ho
rou
gh
an
alysi
s hel
ped
as
we
cou
ld
imp
ose
so
me
con
dit
ion
s in
the
con
trac
t w
e
wo
uld
hav
e n
ever
tho
ug
ht
abo
ut
earl
ier.
Th
is
hel
ped
to s
ecu
re o
ur
pre
ferr
ed a
nd
th
e b
est
per
son
nel
an
d f
ast
del
iver
y c
ycl
es.’
‘
Th
ereb
y,
we
then
hav
e co
mp
etit
ive
adv
anta
ge
ov
er o
ur
com
pet
ito
rs a
s w
e hav
e a
hig
her
sup
ply
ch
ain
eff
ecti
ven
ess
and
ver
y g
oo
d s
taff
pro
vid
ed b
y t
he
supp
lier
. T
his
in
crea
sed
serv
ice
qu
alit
y h
elp
s im
pro
ve
ou
r in
tern
al
pro
cess
es a
nd
th
e p
rod
uct
ion
.’
Co
mp
any
G
‘
It d
epen
ds
on t
he
eval
uat
ion
of
the
sup
ply
sid
e
wh
ich m
igh
t le
ad t
o a
con
trac
t or
refu
sing
ou
r
reques
t.’
‘
Only
usi
ng c
om
pet
itor
inte
llig
ence
in
dec
isio
ns
wil
l n
ot
affe
ct t
he
rela
tio
nsh
ip
bec
ause
ther
e ar
e al
way
s tw
o a
gre
ein
g o
n
con
trac
ts.’
‘
Cer
tain
ly,
afte
r u
sing
co
mp
etit
or
inte
llig
ence
we
can
mak
e su
re,
that
an
ap
pro
pri
ate
dec
isio
n
is m
ade.
If
we
kn
ow
th
at t
he
oth
er c
ust
om
ers
of
this
sup
pli
er a
re s
mal
ler
than
us,
ou
r po
siti
on
in
neg
oti
atio
n c
an b
e fo
ster
ed.’
‘
…is
ver
y i
mp
ort
ant
and
aff
ects
ou
r al
loca
tio
n
of
reso
urc
es.’
‘
Yes
, o
f co
urs
e.’
‘
Ad
van
tag
es c
an b
e fi
rst
of
all
on
cost
lev
el,
des
ign
asp
ects
, ea
rly a
cces
s to
in
no
vat
ion
s an
d
even
th
e fa
ct,
that
th
is s
up
pli
er m
igh
t re
loca
te
or
set
up
a n
ew f
acil
ity n
ear
us,
to d
eliv
er f
aste
r
and
at
low
er c
ost
s.’
38
Co
mp
any
H
‘
In c
ase
of
ES
I or
suppli
er d
evel
op
men
t th
e
rela
tion
ship
is
inte
nsi
fied
an
d c
on
sid
ered
as
stra
tegic
. T
his
par
tner
ing r
equ
ires
a c
lose
rela
tion
ship
, in
tense
com
mu
nic
atio
n a
nd
exac
tly k
now
ing w
hat
the
supp
lier
is
do
ing
.’
‘
Th
ereb
y,
the
rela
tion
ship
is
fost
ered
wit
h t
he
suppli
er.’
‘
Fro
m o
ur
po
int
of
vie
w, I
do
n’t
th
ink
so
. I
sim
ply
bel
iev
e th
at d
ue
to o
ur
inn
ov
atio
ns
we
are
in a
lea
din
g p
osi
tio
n f
rom
th
e su
pp
lier
’s
per
spec
tiv
e an
d s
et i
nd
ust
ry s
tan
dar
ds.
Th
is
imp
lies
th
at f
or
smal
ler
com
pet
ito
rs t
he
com
pet
itio
n f
or
sup
pli
ers
is i
nte
nsi
fied
as
shar
ing
th
e su
pp
lier
wit
h u
s w
ou
ld i
mply
pro
fiti
ng
fro
m o
ur
inn
ov
atio
ns.
Fu
rth
er,
the
ou
tlo
ok
to h
ave
hig
h a
nd
co
nst
ant
gro
wth
in
the
nex
t y
ears
in
crea
ses
the
wis
h o
f su
pp
lier
s to
coll
abo
rate
wit
h u
s as
th
is i
mp
lies
a s
oli
d b
asis
of
rev
enu
es.’
‘
By
con
sid
erin
g c
om
pet
ito
r in
form
atio
n i
n
pu
rch
asin
g d
ecis
ion
we
are
able
to
ch
oo
se a
sup
pli
er n
ot
wo
rkin
g t
og
eth
er w
ith
com
pet
ito
rs.
Dev
elop
ing t
his
su
pp
lier
or
par
tner
ing
by
ES
I th
en o
f co
urs
e o
ffer
s u
s
com
pet
itiv
e ad
van
tag
e.’
‘
Th
is m
ay b
e in
ter
ms
of
pri
ces;
bu
t m
ain
ly b
y
join
t in
no
vat
ion
s o
ther
co
mp
etit
ors
can
no
t
acce
ss a
s th
ey a
re p
rote
cted
by
ND
As.
’
Co
mp
any
I
‘
In c
ase
of
capac
ity b
ott
len
eck
s o
f a
sup
pli
er,
del
iver
ing t
o c
om
pet
itors
, w
e ca
n a
lway
s p
lay
the
card
of
bei
ng p
art
of
the
gro
up
co
mp
any
.
This
hel
ps
bei
ng
pre
ferr
ed o
ver
ou
r
com
pet
itors
.’
‘
In a
sp
ecif
ic r
elat
ion
ship
co
nsi
der
ing
th
is
info
rmat
ion
hel
ped
dev
elop
a s
up
pli
er a
nd
to
bec
om
e th
e pre
ferr
ed c
ust
om
er o
f h
im.’
‘
[If
we
fin
d a
new
su
pp
lier
due
to o
ur
com
pet
ito
r an
alysi
s] o
f co
urs
e th
is w
ill
affe
ct
reso
urc
e al
loca
tio
n,
bu
t w
e ar
e th
en n
ot
bet
ter
off
as
the
bu
yer
pu
rch
asin
g f
rom
th
is s
up
pli
er
for
sev
eral
tim
es.’
‘Def
init
ivel
y,
this
is
par
t o
f o
ur
stra
teg
y t
o
po
siti
vel
y i
nfl
uen
ce o
ur
reso
urc
e al
loca
tio
n b
y
app
lyin
g c
om
pet
ito
r in
tell
igen
ce.’
‘
We
mig
ht
hav
e ea
rlie
r ac
cess
to
inn
ov
atio
ns.
..th
e su
pp
lier
mig
ht
even
be
ince
nti
viz
ed t
o i
nn
ov
ate
as h
e is
del
iver
ing
to
sev
eral
co
mp
etit
ors
wh
o a
ll h
ave
the
sam
e
req
uir
emen
ts a
nd
sta
nd
ard
s w
ho
nee
d
con
stan
tly t
o b
e im
pro
ved
.’
‘Par
tner
ing
wit
h a
su
pp
lier
, al
read
y d
eliv
erin
g
to a
cu
sto
mer
may
be
ver
y g
oo
d, as
we
can
pro
fit
fro
m a
su
pp
lier
wh
o i
s ex
per
ien
ced
wit
h
this
typ
e o
f pro
du
ct a
nd
wh
ose
pro
du
cts
are
less
ex
pen
siv
e th
an n
ewly
dev
elo
pin
g t
hem
.’
‘
We
can p
rofi
t fr
om
lo
w p
rice
s d
ue
to h
igh
er
pu
rch
asin
g v
olu
mes
wh
en s
ever
al b
ig
com
pet
ito
rs p
urc
has
e fr
om
on
e su
pp
lier
and
we
also
hav
e ac
cess
to
in
no
vat
ion
s.’
‘
If w
e fi
nd
a n
ew s
up
pli
er w
ho
cu
rren
tly
del
iver
s to
co
mp
etit
ors
bu
t n
ot
to u
s, t
his
is
an
op
po
rtu
nit
y,
as w
e ca
n a
lso
en
ter
a p
artn
ersh
ip
wit
h t
his
on
e at
rel
ativ
ely l
ow
co
st a
s
com
pet
ito
r al
read
y i
nv
este
d i
n h
im…
. th
is w
ill
lead
to
co
mp
etit
ive
adv
anta
ge.
’
Co
mp
any
J
‘
I do n
ot
expec
t th
is t
o a
ffec
t th
e re
lati
on
ship
wit
h o
ur
suppli
er.
He
is –
ju
st a
s u
s – o
nly
con
cern
ed a
bout
mak
ing
rev
enu
e.’
O
nly
wh
en e
lim
inat
ing
a s
upp
lier
in t
he
case
he
pre
fers
anoth
er o
f his
cust
om
ers,
th
e
rela
tion
ship
wit
h t
his
suppli
er i
s en
ded
.
‘
I d
on
’t t
hin
k s
o. W
e si
gn
a c
on
trac
t, t
o w
hic
h
bo
th p
arti
es a
re s
tric
tly b
oun
d t
o.
Th
is w
ill
thu
s
no
t af
fect
th
e al
loca
tio
n o
f re
sou
rces
.’
‘
Acc
essi
ng
bet
ter
reso
urc
es i
s o
nly
aff
ecte
d b
y
off
erin
g h
igh
er p
rice
s.’
‘
Har
d t
o s
ay,
bu
t I
wo
uld
no
t ex
pec
t it
. A
s th
e
imp
act
of
this
kin
d o
f in
form
atio
n i
s lo
w,
this
seem
s u
nre
alis
tic.
’
Tab
le 8
: P
erce
ived
im
pac
t on s
ourc
ing a
ctiv
itie
s
39
Finally, all participants expecting a better resource allocation from competitor-oriented
purchasing activities also consider this fact to lead to competitive advantage. Better access to
resources, either via cost savings, staffing or the overall supplier’s behavior, positively affects a
focal company’s competitiveness. Further advantages can be on ‘cost level, design aspects, early
access to innovations and even the fact, that this supplier might relocate or set up a new facility
near [the focal company], to deliver faster and at lower costs’ (Company G).
Interpretation
By supplier selection and development close relationships with external partners can be built
up and a long-term strategic relationship can be established (Chen et al., 2004, p. 505; Wognum
et al., 2002). Even though all companies are interested in achieving a strong relationship with
the supplier – by being considered as a strategic or even a preferred partner – they do not
perceive competitor intelligence to help achieve this objective. Only few companies consider a
well-elaborated and competitor-based supplier selection and purchasing decision to influence
the relationship between the buying and selling side. There seem to be more important factors,
such as constant and high purchasing volumes or intense and continuous communication for a
well-functioning buyer-supplier relationship.
In line with the assumption that the competitor intelligence enables a company to achieve the
PCS, companies aiming at achieving this status consider competitor-based information to
positively affect this relationship. Further, they accept the fact, that this kind of information
applied in strategic purchasing decisions positively influences the resource allocation and
competitive advantage. This in return means that companies stating that they aim at a
preferential treatment seem to realize this objective with the help of competitor intelligence.
Being aware of the antecedents of the PCS proposed by literature (Essig & Amann, 2009, p.
106; Ramsay & Wagner, 2009, p. 130) that positively affect the buyer-supplier relationship, they
(Company B, C, E, H) might be able to receive the status of a preferred customer. The
companies assumption that this favorable treatment by the supplier in terms of resources then
ultimately leads to a competitive advantage is supported by literature (Hüttinger et al., 2012, p.
2; Steinle & Schiele, 2008, p. 14).
Even though for some companies the relationship between the supplier and the buyer may not
be affected by using competitor intelligence, only two companies dismiss the idea that
considering competitor intelligence in strategic purchasing decisions ultimately leads to a better
resource allocation. This contradicts the assumption by Bergen and Peteraf (2002), who stated
that it is unknown whether the use of information and knowledge about competitors actually
pays off the effort put in acquiring this information. In practice it seems to be widely accepted
that competitive intelligence leads not only to a better outcome of the decision but that this
better outcome further improves the resources a focal company has access to. Ultimately,
acquiring better resources also leads to competitive advantage over competitors, as the company
may have early access to innovations, obtain lower prices or reduced transaction costs. Contrary
to the results of Ramsay (2001, p. 41), the companies at hand are able to determine whether they
have achieved ‘competitive advantage as a result of some purchasing activity’. They state that
they have competitive advantage and that this is partly the result of considering competitor
information. Nevertheless, it is questionable whether the interviewees really know how this
competitive advantage was achieved (see also Ramsay, 2001, p. 41). Few interviewees constrain
40
their statements by adding, that using this kind of information surely helps to achieve
competitive advantage, but is a part of the whole purchasing strategy.
Specific findings
In the last financial crisis, an important supplier of Company H struggled severely and
Company H offered him financial support. In the case mentioned by the interviewee this support
was only provided by Company H. However, in some cases this support might also be granted
to the supplier jointly with other competitors sharing this supplier. Financial support of a
supplier is especially necessary when the supplier is the only one who can provide the respective
product or if the supplier is involved in ESI. According to the interviewee, this support
positively affects the relationship as well as the supplier’s resource allocation. Company I and J
would also support essential strategic suppliers. This financial support is done on their own and
not together with competitors. The interviewee of Company I even states, that they ‘accept that
[they] finance the supplier of [their] competitors’. However, Company I and J do not assume
that this financial support in cases of a supplier’s crisis will affect the relationship or the
resource allocation. They consider both, their company and the supplier, to be egoistic and just
aim at receiving profits. Company I and J even expect a supplier, who is financially supported
by one of them, to prefer competitors.
Interestingly, Company C, E and I especially highlight that competitors, sharing the same
supplier, offer a great opportunities to access innovations or the opportunity of purchasing at
lower costs. By considering competitor information, Company C ‘may reduce transaction costs
and costs resulting from investments in less appropriate suppliers’. Thus, this information helps
reduce risks and uncertainty regarding supplier selection. Similarly, Company E states that
‘sometimes, however, it is very good to have a competitor purchasing from [the] supplier’;
supported by Company I who considers ‘partnering with a supplier, already delivering to a
customer [to] be very good, as [they] can profit from a supplier who is experienced with this
type of product and whose products are less expensive than newly developing them’. Further,
this supplier may be incentivized to invest in innovations – as he would like to further deliver to
these customers – and thus offers the opportunity to all customers of being innovative and
competitive. The fact, that Company I is then not the only one accessing these innovations, is
less important from the focal company’s perspective.
5.4 Discussion of gained insights
Firstly, a critical view on the participants’ statements is necessary. All of the interviewed
apply purchasing strategies, guidelines and process definitions in order to come to strategic
purchasing decisions. Even though they might state that such tools are used, one cannot
guarantee that they apply these correctly or use these at all. This would imply, that the tools,
generally aiming at a more effective and efficient strategic purchasing, might have a contrary
effect leading to worse results due to their incorrect usage. However, within this thesis it is
assumed, that the interviewees, all experienced in their field of expertise, exactly know how to
transpose theory into practice.
Secondly, the above mentioned statements from the interviewees gained during this
exploratory multiple-case study are hypothetical assumptions or indications by the individuals
about the use of competitor intelligence and their effects on a company’s resource allocation.
41
Therefore, this chapter intends to go one step further by categorizing and linking several
answers from the different research questions in order to identify three types of companies
differing in the application of competitor intelligence.
Awareness and acceptance of competitors
Overall, the generalization of authors that most companies do not consider competitor
information with regard to purchasing activities (Day & Nedungadi, 1994, p. 32; Ramsay, 2001,
p. 41) is incorrect according to this thesis’ findings. Some companies (Company A, B, C, D, E,
G) seem to really think through the concept of competitor intelligence, its impact on the
suppliers’ resource allocation and the effect on the focal company’s competitiveness.
In the course of strategic purchasing decisions, these companies apply strict supplier
evaluation rules and tend to search for potential alternatives in order to ultimately select the
most appropriate supplier to fulfill their demand for input factors. This supplier evaluation
includes, aside from product relevant aspects and general market information, supplier profiles
which contain information about both direct and indirect competitors also purchasing from this
supplier. Using competitor intelligence in decision making is essential for all of the companies
interviewed. By being aware about competitors and by knowing the own status compared to that
of rivals from a supplier's perspective, the participants expect to come to a better and well-
elaborated purchasing decision. For example, in the cases where there exists an appropriate
alternative to a supplier, who does not provide to competitors, this supplier is considered as
preferential over the one, delivering to competitors.
Nevertheless, none of companies analyzed exclusively rely on competitor intelligence but
moreover include additional aspects. Decisions, which are based on little information only in
this context competitor intelligence, are not considered as optimal by the companies. Similarly,
in order to increase a decision’s rationality, literature demands relatively comprehensive
information (Dean & Sharfman, 1996, p. 374) leading to a complex, multidimensional picture of
all points of dominance or inferiority compared to buyers sharing the same supplier (Day &
Nedungadi, 1994, p. 32). Additionally, Company A accentuates that competitor information
which might be weighted too high compared to other aspects ‘might lead to worse choices, as
[they] might tend to choose a supplier who is not the best for [their] requirements’. In this
context, Company A refers to another supplier who was newly selected. As some well-known
competitors already purchased from the respective supplier this supplier was not considered as a
potential partner even though this specific supplier had the best reputation and financial
situation. Thus, Company A purchased from another supplier from the local network and
invested greatly. This, however, did not prevent the selected supplier from going bankrupt
within one year and Company A had to search for a new supplier.
This implies, with the help of purchasing strategies, guidelines and policies, the companies at
hand aim at decisions which are rational in order to actively improve one’s competitive position
(see also Auster & Choo, 1994). Companies expect to reduce uncertainty and risk by applying
objective criteria, i.e. competitor intelligence, and presume that this also leads to a better and
more elaborated outcome. According to the interviewees this outcome refers to a positive
influence on resource allocation and a companies’ competitiveness. Having a strengthened
position in contract negotiations, the companies believe to have access to better resources which
may ultimately lead to a sustainable competitive advantage. Only three interviewed companies,
42
expect that competitor intelligence positively affects the buyer-supplier relationship, causing a
closer and more personal collaboration with the supplier. They hope that the supplier gains
awareness about the company’s effort in purchasing decisions, so that the supplier is encouraged
to grant the status of a preferred customer.
Overall, the interviewees, most of them working for smaller companies, reason that the
importance of considering competitor information results from the low dependency of the
supplier from the focal companies due to their low purchasing volumes. Therefore, they all must
be conscious about suppliers they share with rivals in order to be able to appropriately react to
competitive actions.
Negligibility of competitive customer base
Company F, I and J consider competitors purchasing from the same supplier to be good for
the buying side and emphasize the possibility of profiting from this competitive customer base.
They assess the suppliers’ capacity and suitability for the respective decision and mainly rely on
hard figures. The examined companies neglect to consider indirect competitors. Their focus lies
entirely on direct competition, being supplied by a joint partner, which is generally regarded as a
sign of high quality and an opportunity to easily access innovations (Company F and I). Even
though, all companies have access to information about direct competitors, none of the
interviewees considers this information as a must-have but more as a nice-to-know. Company J
even neglects to consider competitor information. The interviewee states that only in rare cases
this type of information is considered to a small extent; in this context the latter refers to the
unlikely case of inferiority compared to rivals with regard to one supplier in which Company J
would try to replace the respective supplier.
This also implies that none of the before mentioned companies concedes high impact on a
decision’s result to competitor information. A reason for this negligibility about competitors
sharing the supplier base might be the fact that all three companies are Global Players with high
annual revenue. This attitude is especially supported by a statement of Company J, assuming
that being a high-volume and a well-known customer automatically leads to preferential
treatment by suppliers. Therefore, Company J does not see the necessity to consider competitor
information.
Even though agreeing on the negligibility of competitor information, Company F and I
expect an impact of competitor information on the companies’ sourcing activities. Company F
perceives this information to positively affect the buyer-supplier relationship as the supplier
might become aware of the focal company’s importance, which then might lead to a preferential
treatment. Company I, however, does not perceive this information to impact the buyer-supplier
relationship but expect it to influence the resource allocation and lead to competitive advantage.
Competitive advantage and resource allocation effectiveness results, according to both
interviewees, from the fact that an experienced supplier is chosen in the course of a strategic
decision and competitors sharing this supplier might lower prices or help access innovations.
Contrary to those expectations, Company J does not expect any impact on sourcing activities in
the case they would consider competitor intelligence in purchasing decisions. The only
possibility to influence resource allocation, according to this interviewee, is by ‘offering higher
prices’.
43
The companies’ disinterest of the suppliers’ customer bases seems reasonable considering
their aim to decrease their dependencies from suppliers. By limiting to the purchasing volume
with one supplier to a certain degree, this inevitably implies that competitors also purchase from
this supplier. Company J even accentuates the importance that a ‘supplier has not only [the]
group company as customer’.
Elimination of suppliers delivering to competitors
Finally, Company H states that they ‘only consider suppliers who do not deliver to [the
company’s direct] competitors’ in strategic purchasing decisions, even though the interviewee
also considers the fact that competitors are purchasing from shared suppliers as a sign of high
quality. Nevertheless, Company H eliminates suppliers for ESI or supplier development, which
provide to direct competitors. This implies that Company H heavily weighs competitor
information in strategic purchasing decisions and neglects to consider additional aspects, such as
the supplier’s profile or previous experience. On the foreground of yet another statement from
this interviewee that the company aims at decreasing dependency from the supplier, objective
seems to contradict the attitude of eliminating suppliers delivering to direct competitors.
Keeping the own purchasing volume per supplier to a maximum of 30% of the supplier’s sales
volume, automatically implies that the rest is purchased by other companies. However, in case
of significant inferiority of Company H (the interview gives an example in which they
contribute to a mere 5% of the supplier’s revenue and a competitor to 80%), the company
assesses whether it is absolutely necessary to purchase from this supplier.
This leads to the conclusion, that Company H differentiates two types of purchases within
strategic purchasing: (1) the (re)purchase of strategic products with suppliers with whom they
may accept competitors to purchase from and (2) the agreement on ESI or supplier development,
in which suppliers, who deliver to direct competitors, are eliminated from the list of potential
partners. By selecting a supplier who does not deliver to direct competitors, the interviewee
expects the relationship with the supplier to be strengthened as both partners commit themselves
to an intense relationship via ESI or supplier development. Thereby, the interviewee also
expects to improve his standing in terms of competitive advantage, which is considered as the
main target of ESI or supplier development by both literature and practice. Contrary to this, the
participant reasons that an improved resource allocation is unlikely, as the company in general
holds a leading position with all its suppliers.
In sum, the complete elimination of suppliers, who provide to direct customers, could be
considered as a shortsighted attitude of Company H. Only resorting to suppliers, who do not
deliver to competitors in the case of ESI or supplier development, seems to be ignorant.
Thereby, Company H might eliminate a supplier, which may be better and more appropriate in
terms of quality, experience, etc. This attitude is surprising on the foreground that in case of
joint innovations – according to the interviewee – a focal company’s competitors purchasing
from the same supplier, ‘cannot access [the innovations] as they are protected by NDAs’. Aside
from that, the interviewee also perceives the company to be superior to competitors from the
perspective of suppliers. Holding a leading position, would help Company H protect itself
against competitive attacks of rivals with inferior positions. A logical implication of eliminating
suppliers providing to competitors, could be the fact that Company H, a well-known first-tier
supplier to the automotive industry, is especially alert of knowledge spillover to competitors.
Having competitors, who have access to similar or even identical knowledge, would reduce the
44
company’s competitiveness on the supply market (downstream) and simultaneously strengthen
the competitor’s position.
6. Discussion and conclusion
6.1. Summary of the study’s main findings
This thesis showed that competitor intelligence impacts the outcome of the purchasing
decision and is also perceived to improve a buying company’s acquisition of resources as well
as competitiveness. The following illustration shows the main results from the multiple-case
study and is supported by quantifications regarding the amount of interviewees (n) who endorse
the respective assumption established on the preliminary literature review.
Figure 3: Quantitative interview results
Use of competitor intelligence
Although Day and Nedungadi (1994) argue that most companies neglect to consider
competitor intelligence, in the course of this multiple-case study and corresponding to the
preconditions mentioned in chapter 4.1 the author was able to find ten companies – more or less
– using this kind of information. However, results show that actually only nine of them really
use competitor intelligence in purchasing decisions. Purchasing decisions, according to all
interviewees, impute high impact on the company’s business, involve several functions and are
ultimately crucial for the survival of the company (see also Eisenhardt, 1989, p. 546;
Schoemaker, 1993, p. 107).
All companies have defined purchasing strategies, guidelines for supplier selection or criteria
for supplier evaluation. Some companies seem to have very strict rules of conduct whereas
others, mainly with revenue smaller than € 5 billion, seem to have less formal and more flexible
ones. Anchored with those guidelines and policies, companies set up supplier selection and
categorization criteria, based on quantitative as well as qualitative aspects. Quantitative criteria
include the financial situation of the buyer, sourcing conditions or the total cost of ownership.
Qualitative criteria refer to the previous experience with this supplier, the supplier’s suitability
for the respective product and often a well-evaluated supplier profile, referring to all kind of
qualitative aspects including the supplier’s customer base.
The use of competitor intelligence within strategic purchasing decisions and the level of
detail of this information highly vary between the companies. Even though, all companies are
generally aware of direct and indirect competitors, more detailed information is difficult to
gather. Furthermore, results indicate that larger companies seem to have more difficulties to
acquire information about indirect competitors. Aside from being not capable to collect this
45
information, the participants neglect trying to access this information about indirect competitors
as they do not perceive indirect competitors as a threat for the factor market (see also Bergen &
Peteraf, 2002; Day & Nedungadi, 1994, p. 41).
Impact on decision’s outcome
In general all companies stated that the fact that a supplier is shared with rivals is perceived
as both, an opportunity and a threat. It might be an opportunity as the supplier is experienced
and the focal company might have the possibility to access innovations jointly developed by the
supplier with other customers. Additionally, it can be considered as a sign of high-quality.
Simultaneously, intellectual property rights might be jeopardized or competitors profit from a
focal company’s investment in the supplier.
The role of competitor intelligence allotted to purchasing decisions varies. In line with
existing literature (Auster & Choo, 1993; Bunn, 1993; Dean & Sharfman, 1996, p. 389; Lester
& Waters, 1989; Sheth, 1973) some of the companies support the assumption that a thorough
environmental scanning is critical for making a well-elaborated decision and ultimately leading
to a better outcome. Companies assume that using competitor intelligence within purchasing
decisions positively affects the outcome. This kind of information helps them protect their own
position on the supply market and thus is the main driver of competitive attack and response
(see also Chen, 1996, pp. 101-102). Nevertheless, few interviewees do not consider a decision
based on competitor information to come to a better result than one not relying on competitor
information. This is supported by Bergen and Peteraf (2002) who result that the use of
information and knowledge about competitors and their effects on a decision’s outcome are
unknown.
Influence on suppliers’ resource allocation
Whereas eight out of nine companies attest that competitor intelligence influences the
suppliers’ resource allocation and ultimately the competitive advantage, only some of them
perceive this information to influence the buyer-supplier relationship. Literature however,
considers this to be an interlinked effect: by establishing and maintaining mutually beneficial
inter-organizational relationships (Chen et al., 2004) a focal company is able to access the
supplier’s resources quicker, at lower costs and with less uncertainty and ultimately to better use
the partners’ expertise (Wognum et al., 2002).
In terms of the PCS, literature considers a close and intense relationship as a prerequisite for
better resource allocation (Baxter, 2012, p. 1250; Ellegaard et al., 2003, p. 346; Ellegaard &
Ritter, 2006, p. 7; Hald, 2012, p. 1229) as well as competitive advantage (Hüttinger et al., 2012,
p. 2; Steinle & Schiele, 2008, p. 14). Some companies, being aware of the importance of being
preferred by the supplier, consider the use of competitor intelligence to positively the buyer-
supplier relationship in order to achieve the PCS. Contrary to this, the company, totally
neglecting competitor information, perceives to have a high power compared to competitors,
resulting from high and constant purchasing volumes, which then automatically leads to
preferential treatment by the supplier.
In general, companies widely accept the influence of competitor intelligence on the suppliers’
resource allocation. Without affecting the relationship itself, especially the positioning in
contract negotiations is positively affected which then leads to better conditions with regard to
46
purchasing activities. Thereby, the companies are able to achieve competitive advantage, such as
access to innovations, lower prices or lower overall costs.
Even though literature indicates that companies often may not be aware about whether they
achieve competitive advantage or how they do so (Ramsay, 2001, p. 41), the interviewees
definitively consider competitor information to be an influencing factor on resource allocation
leading to competitive advantage. These statements, however, only focus on competitor
intelligence and do not consider other aspects within the supply chain. There may be several
other factors, affecting the competitive advantage of a focal company. However, interviewees
might not be aware of or did not mention all factors in the course of the interview.
6.2. New insights and added value to current literature
According to this thesis’ objective, to elaborate companies’ use of information about
competitors with regard to suppliers in purchasing processes in order to show how competitor
intelligence affects suppliers’ resource allocation, current literature not analyzing this issue,
could be extended.
To conclude, this thesis showed that buyers are aware of competitors sharing the same
suppliers. Even though some authors explicitly point out that most companies do not consider
competitor information with regard to purchasing activities (Day & Nedungadi, 1994, p. 32;
Ramsay, 2001, p. 41), results indicate that most of the companies consider this information.
Further and contrary to the statement by Bergen and Peteraf (2002) that the effectiveness of
using competitor information is not acknowledged, most of the companies interviewed consider
this information to positively affect the preferential resource allocation as well as the
competitive advantage.
It becomes clear, that competitor-based information is especially important for strategic
purchasing in terms of supplier selection and evaluation. Even though it is difficult to access this
information, regardless the effective internal and external network purchasing managers rely on,
most companies generally consider this information to be important for the final outcome of the
decisions. This might, however, depend on the respective decision, on the purchasing volume or
on the availability of alternative suppliers. Therefore, one can differentiate between three
different types of companies with regard to the awareness and use of competitor information.
The first one perceives competitor information to be important for a purchasing decision’s
outcome and considers this information to positively affect to the company’s allocation of
resources and competitive advantage. The second type, even though having access to this kind
of information, considers this competitor intelligence to be redundant for decisions. However,
they perceive competitors to be an opportunity to have access to better resources and therefore
influence competitive advantage. Finally, the last type of company, entirely neglects suppliers
delivering to direct customers for ESI and supplier development.
With regard to the PCS, the perception of companies about the importance of competitor
intelligence greatly varies. However, and contrary to the assumptions made in the beginning of
this thesis, most companies dismiss the idea that applying competitor intelligence affects the
relationship between the supplier and the buyer. Few companies even expect a preferential
treatment resulting from their company’s status (high-volume customer). Contrary to this, some
companies, aiming at the favorable treatment by the supplier, are aware of the importance of
gathering and considering competitor intelligence in order to achieve the PCS. This is due to the
fact, that purchasing decisions considering this kind of information increase a company’s
47
awareness about competitors sharing the same supplier help to come to better and well-
elaborated outcomes. Also the interviewees expect this fact, to consider competitor information,
to be visible and perceived by the supplier. In case the supplier finds out that a focal company
uses this kind of information, it is expected that the supplier will perceive this customer to have
interest in a close and intense relationship and might cooperate intensively. Thereby, the focal
company then is able to have access to improved resource allocation.
Another insight that is gained by this case study seems to be a logic implication resulting
from the size of the company. There exists a wide range of annual revenue realized by the
companies analyzed. Whereas companies with less than € 5 billion per annum seem to have
access to information regarding direct and indirect competitors, companies with more revenue
tend to only have access to information about direct competitors. That may result from the fact
that smaller companies work closely together with their network and are more depending on the
personal and strong relationship with the supplier. Contrary to this, companies with very high
purchasing volume seem to have a more presumptuous attitude. They even tend to neglect
competitor information in their purchasing decisions as they assume that having high and
constant purchasing volumes with the supplier makes them automatically become a preferred
customer.
Surprisingly, most of the companies do not only perceive competitors sharing the same
supplier to be a threat for a focal company’s business. In case a competitor either has a highly
competitive customer base with high purchasing power or the focal company aims at supplier
development or ESI, competitors generally tend to reject the decision and search for alternatives.
However, most of the companies also highlight the importance of having a shared supplier with
competitors. This is not only a result of the fact, that delivering to customers is a sign of high
product- and service quality. Furthermore, companies expect to be able to access innovations
jointly developed by the supplier and a competitor, even in case a NDA exists. Additionally, if a
supplier has a highly competitive customer base he must innovate and invest significantly in
order to maintain his good reputation with these customers who would otherwise switch the
supplier. Buying companies consider this fact to be an incentive to actively innovate. As this
supplier may then also have high sales this will again reduce the production costs, making it less
expensive for a focal buying company to purchase from a supplier who also delivers to key
competitors.
6.3. Limitations and future research
As in any qualitative or quantitative research, this thesis project also inherits certain
limitations. Often in research a given sample is assessed for major generalizability in order to
achieve applicability of the results for similar or related topics. In this multiple-case study ten
companies were analyzed in order to answer the defined research questions. All those cases
were based on a holistic view by evaluating one situation within a company; i.e. a decision
making process based upon competitor intelligence. These interviews were performed with one
contact person per company.
Firstly, the biggest limitation of this study is the missing objectivity of the participants. Even
though the author tried to eliminate subjectivity and individual interpretation by handing out a
short summary regarding the topic, including definitions and the research background as well as
a pre-test to evaluate the general comprehensibility of the questions in order to have a maximum
of common understanding of all interviewees, the participants might still interpret the questions
48
differently. Furthermore, even though some interviews were confirmed by secondary data
provided by the companies, the probability that interviewees made inconsistent or false
statements is existent. However, the assumption of this thesis is that statements made by the
interviewees appropriately reflect reality. Finally, some participants might also have an
entrenched mindset or follow the path of least resistance. Therefore, the answers given in the
course of the interviews are affected by subjectivity.
Secondly, with regard to improved resource allocation gained via competitor based decisions
this thesis’ results in terms of validity and reliability are limited. By covering ten companies,
operating worldwide and in different industries, and interviewing experiences purchasing
managers the aim was to increase validity and reliability of results. This amount of cases is
sufficient for an exploratory multiple-case analysis (Eisenhardt, 1989; Miles & Huberman,
1984). Furthermore, data triangulation, including qualitative interviews, secondary data
provided by the companies and a literature review for setting up the research framework, helped
to foster both aspects. However, it is not possible to guarantee having highly valid and reliable
results. Mainly, the statements from the interviews strongly depend on the individual perception
of only one respondent per company. This single respondent data may bias the results. Applying
data triangulation by asking several individuals per company would have supported the
individual personal perceptions of the interviewees. A multi-respondent approach to validate
this thesis’ findings could be subject to future research. Interviewing several employees from the
focal company who work with the respective strategic suppliers might foster the validity and
reliability of other studies results and lead to new insights. Another possibility might be to
interview the key account managers or sales department from the supplying side (not only the
purchasing managers from the buying side), to appropriately cover the perceptions of both
involved parties and to confirm the individual statements from the statements from the other
perspective.
Additionally, within this multiple-case study throughout the course of this thesis, performed
within two months, decisions’ effects evolving over time and affecting each other could not be
covered. However, the granted status of a PCS is not a mayfly for one project or purchase
activity but evolves over time and is the result of several purchasing decisions. Especially for
practitioners it might be interesting to know how competitor intelligence in strategic purchasing
influences the decisions outcome and how this might lead to the PCS and affect sustainable
competitive advantage. Therefore, a longitudinal study, examining different points in time, is
appropriate for covering the entire field of considering competitor intelligence in decision
making and how this may sustainably enhance the supplier’s satisfaction and the customer’s
attractiveness resulting in the PCS. Whether this status can be maintained or is undermined by
competitors then depends on the further development of this buyer-supplier relationship. This
development and the individual effects resulting from several dependent decisions also might
become visible in a longitudinal study.
Finally, the generalizability of this study is of analytical nature. Under these circumstances
the term generalization refers to using previously developed theory as a template. By means of
such a template, empirical results of the case studies can be compared (Yin, 2003). As case
studies cannot be viewed as ’sampling units’ using statistics, but rather as ‘individual studies’
that can be used to falsify or confirm an already developed theory, generalization of the results
49
gained with the sample units is difficult. Therefore, theory development needs to be backed up
by other research methods to make the assertion reliable which is thus subject to future research.
The findings of this exploratory multiple-case study offer insights into the relationship of
competitor based purchasing decisions and their effect on the decisions outcome and potential
favorable resource allocation granted by the supplier. Future research needs to validate and
extend these findings. To have generalizable results, future research must consider quantitative
criteria to foster these preliminary and exploratory findings. Furthermore, research should
strengthen the ties in these buyer-supplier relationships by evaluating how competitor-based
decisions influence the resource allocation in the long run.
Results show what kind of competitor intelligence is used within the companies analyzed and
how the interviewees perceive the influence of competitor intelligence on their own competitive
position. The next step would be to truly link competitor intelligence to competitive advantage
and deeply analyze how both concepts relate. That implies a deeper conceptual discussion of
this thesis’ exploratory findings.
Furthermore, this thesis is only based on analyzing the buying side. However, it would be
interesting to know, what kind of competitor intelligence could lead to a manipulation of the
supplying side. Thus, future research should concentrate on analyzing the effects of purchasing
decisions and activities on the vendor’s behavior. Knowing what kind of purchasing decisions or
decisions’ outcome positively affect the buyer-supplier relationship (from the supplier’s
perspective) and the thereby derived resource allocation, might give indications for purchasers
how to actually make strategic purchasing decisions and how to integrate competitor
intelligence.
It would also be interesting to enhance current existing research about resource allocation
decisions. Scholars mainly focus on becoming a preferred customer (e.g. Schiele et al., 2011;
Steinle & Schiele, 2008) by influencing the elaborated antecedents of customer attractiveness
(e.g. Hald, 2012; Ramsay & Wagner, 2009) and supplier satisfaction (e.g. Essig & Amann,
2009). However, little is known about decisions made on the supplier’s side. This study has
shown the relevance of competitor based decisions of the buyer in order to achieve better
decision outcome and a favorable resource allocation. By examining sales decisions from the
supplier’s perspective, e.g. in terms of what information does a supplier consider about
customers, literature may close the gap between the perceptions and expectations of vendors and
buyers.
As indicated by the results, smaller companies are more likely to consider competitor
intelligence in strategic purchasing decisions. This is based on the fact that buyers with less
purchasing volume need to fight with other buyers with high purchasing volumes (which are
often considered as preferred by the selling side). Therefore, smaller companies also focus on
more qualitative factors whereas bigger ones mainly look on cost aspects. An in-depth analysis
of purchasing decision making for both types of companies would give more insights in the
differences of mental models affecting decision making.
50
Appendix
Appendix A: Interview Guidelines
Interview guideline
Addressee: Purchasing Manager
Topic: Role of competitive intelligence in purchasing strategic decisions and
its influence on suppliers’ resource allocation
Time: 60 minutes
Medium: Telephone / Face-to-face with audio-recording
Focus:
(a) How are these strategic decisions in the purchasing process
made?
a. What kind of competitor information is regarded?
b. How is this information collected?
(b) What is the role of competitor information in purchasing
decision making?
(c) How can the use of competitor information throughout the
purchasing decision process influence supplier resource
allocation?
Questions
1. Opening:
- Short introduction of myself: Who am I and what do I do.
- Motivation of my research and aim as well as interview objectives
- Consent for audio recording
- Ethical issues (privacy / confidentiality)
2. Background of the interviewee:
- Please, briefly introduce yourself including your position in your
company and since when you hold this position.
3. Strategic decisions within your department:
- Please explain one purchasing decision (one relationship to a supplier) in
detail.
- What makes this case so important/special compared to other cases? Why
was it successful/ unsuccessful?
- How are strategic purchasing decisions?
- Does the company provide policy/ guidelines/ rules or process definitions
that must be followed during such decisions?
51
4. Focus on competitor intelligence:
- How did you use this kind of information in this specific case?
o In which context/ to what extent do you consider information
about competitors and their actions sharing the same supplier?
o How did you get this information? What kind of sources did you
take into account to gather information about competitors?
o How do you perceive the impact of using this kind of information
on the decision’s outcome? How important is competitor
information compared to other information used in strategic
purchasing decisions
o How did the supplier reply to this information or to decisions
based on this information?
5. Outcome of competitor based decisions:
- With regard to competitor information: How do you perceive the impact
of competitor information on strategic decision making? Do you perceive
the outcome to be better in decisions based on competitor information,
than on decisions not including such information?
- Compared to projects using other kinds of information (and not
competitor information), how was the outcome of this competitor-based
decision influenced?
6. The influence on resource allocation:
- What are the effects of these competition-based purchasing decisions on
the relationship with your supplier?
- Knowing that competitor-based decisions come to a more effective
outcome: Do you consider this assumption in decision making processes?
In other words: Do you actively try to manipulate the relationship with
the decisions outcome?
- How did this decision making help you to be granted better resource
allocation by the supplier?
- What was the role of this kind of decisions on your competitive
advantage over competitors? What did the supplier give you what was
better for you than for competitors? What kind of advantages did you get
this way? (e.g. innovation resources, etc…)
7. Conclusion:
- Summary
- Further contacts
- Next steps
52
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